Vol. 80 Thursday, 

No. 83 April 30, 2015 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 412 

Office of the Secretary 

45 CFR Part 170 

Medicare Program; Hospital Inpatient Prospective Payment Systems for 

Acute Care Hospitals and the Long-Term Care Hospital Prospective 

Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions 

of Quality Reporting Requirements for Specific Providers, Including 

Changes Related to the Electronic Health Record Incentive Program; 

Proposed Rule 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24324 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

Office of the Secretary 

45 CFR Part 170 

[CMS–1632–P] 

RIN–0938–AS41 

Medicare Program; Hospital Inpatient 

Prospective Payment Systems for 

Acute Care Hospitals and the LongTerm Care Hospital Prospective 

Payment System Policy Changes and 

Fiscal Year 2016 Rates; Revisions of 

Quality Reporting Requirements for 

Specific Providers, Including Changes 

Related to the Electronic Health 

Record Incentive Program 

AGENCY: Centers for Medicare and 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: We are proposing to revise the 

Medicare hospital inpatient prospective 

payment systems (IPPS) for operating 

and capital-related costs of acute care 

hospitals to implement changes arising 

from our continuing experience with 

these systems for FY 2016. Some of 

these changes implement certain 

statutory provisions contained in the 

Patient Protection and Affordable Care 

Act and the Health Care and Education 

Reconciliation Act of 2010 (collectively 

known as the Affordable Care Act), the 

Pathway for Sustainable Growth Reform 

(SGR) Act of 2013, the Protecting Access 

to Medicare Act of 2014, and other 

legislation. We also are addressing the 

update of the rate-of-increase limits for 

certain hospitals excluded from the 

IPPS that are paid on a reasonable cost 

basis subject to these limits for FY 2016. 

We also are proposing to update the 

payment policies and the annual 

payment rates for the Medicare 

prospective payment system (PPS) for 

inpatient hospital services provided by 

long-term care hospitals (LTCHs) for FY 

2016 and implement certain statutory 

changes to the LTCH PPS under the 

Affordable Care Act and the Pathway for 

Sustainable Growth Rate (SGR) Reform 

Act of 2013 and the Protecting Access 

to Medicare Act of 2014. 

In addition, we are proposing to 

establish new requirements or to revise 

existing requirements for quality 

reporting by specific providers (acute 

care hospitals, PPS-exempt cancer 

hospitals, and LTCHs) that are 

participating in Medicare, including 

related proposals for eligible hospitals 

and critical access hospitals 

participating in the Medicare Electronic 

Health Record (EHR) Incentive Program. 

We also are proposing to update policies 

relating to the Hospital Value-Based 

Purchasing (VBP) Program, the Hospital 

Readmissions Reduction Program, and 

the Hospital-Acquired Condition (HAC) 

Reduction Program. 

DATES: Comment Period: To be assured 

consideration, comments on all sections 

of this proposed rule must be received 

at one of the addresses provided in the 

ADDRESSES section no later than 5 p.m. 

EST on June 29, 2015. 

ADDRESSES: In commenting, please refer 

to file code CMS–1632–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may (and we 

encourage you to) submit electronic 

comments on this regulation to http://

www.regulations.gov. Follow the 

instructions under the ‘‘submit a 

comment’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1632–P, P.O. Box 8013, Baltimore, 

MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments via express 

or overnight mail to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1632–P, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call the telephone number (410) 

786–7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, we refer readers to the 

beginning of the SUPPLEMENTARY

INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Ing-Jye Cheng, (410) 786–4548 and 

Donald Thompson, (410) 786–4487, 

Operating Prospective Payment, MS– 

DRGs, Deficit Reduction Act HospitalAcquired Acquired Conditions—Present 

on Admission (DRA HAC–POA) 

Program, Hospital-Acquired Conditions 

Reduction Program, Hospital 

Readmission Reductions Program, Wage 

Index, New Medical Service and 

Technology Add-On Payments, Hospital 

Geographic Reclassifications, Graduate 

Medical Education, Capital Prospective 

Payment, Excluded Hospitals, and 

Medicare Disproportionate Share 

Hospital (DSH) Issues. 

Michele Hudson, (410) 786–4487, 

Long-Term Care Hospital Prospective 

Payment System and MS–LTC–DRG 

Relative Weights Issues. 

Siddhartha Mazumdar, (410) 786– 

6673, Rural Community Hospital 

Demonstration Program Issues. 

Cindy Tourison, (410) 786–1093, 

Hospital Inpatient Quality Reporting 

and Hospital Value-Based Purchasing— 

Program Administration, Validation, 

and Reconsideration Issues. 

Pierre Yong, (410) 786–8896, Hospital 

Inpatient Quality Reporting—Measures 

Issues Except Hospital Consumer 

Assessment of Healthcare Providers and 

Systems Issues. 

Elizabeth Goldstein, (410) 786–6665, 

Hospital Inpatient Quality Reporting— 

Hospital Consumer Assessment of 

Healthcare Providers and Systems 

Measures Issues. 

Mary Pratt, (410) 786–6867, LTCH 

Quality Data Reporting Issues. 

Kim Spalding Bush, (410) 786–3232, 

Hospital Value-Based Purchasing 

Efficiency Measures Issues. 

James Poyer, (410) 786–2261, PPSExempt Cancer Hospital Quality 

Reporting Issues. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24325 

Deborah Krauss, (410) 786–5264, and 

Alexandra Mugge, (410–786–4457), EHR 

Incentive Program Clinical Quality 

Measure Related Issues. 

Elizabeth Myers, (410) 786–4751, EHR 

Incentive Program Nonclinical Quality 

Measure Related Issues. 

Lauren Wu, (202) 690–7151, Certified 

EHR Technology Related Issues. 

Kellie Shannon, (410) 786–0416, 

Simplified Cost Allocation Methodology 

Issues. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All public 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all public 

comments received before the close of 

the comment period on the following 

Web site as soon as possible after they 

have been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Publishing Office. This 

database can be accessed via the 

Internet at: http://www.gpo.gov/fdsys. 

Tables Available Only Through the 

Internet on the CMS Web site 

In the past, a majority of the tables 

referred to throughout this preamble 

and in the Addendum to the proposed 

rule and the final rule were published 

in the Federal Register as part of the 

annual proposed and final rules. 

However, beginning in FY 2012, some of 

the IPPS tables and LTCH PPS tables are 

no longer published in the Federal 

Register. Instead, these tables are 

generally only available through the 

Internet. The IPPS tables for this 

proposed rule are available through the 

Internet on the CMS Web site at: http:// 

www.cms.hhs.gov/Medicare/medicareFee-for-Service-Payment/

AcuteInpatientPPS/index.html. Click on 

the link on the left side of the screen 

titled, ‘‘FY 2016 IPPS Proposed Rule 

Home Page’’ or ‘‘Acute Inpatient—Files 

for Download’’. The LTCH PPS tables 

for this FY 2016 proposed rule are 

available through the Internet on the 

CMS Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/LongTermCareHospitalPPS/

index.html under the list item for 

Regulation Number CMS–1632–P. For 

further details on the contents of the 

tables referenced in this proposed rule, 

we refer readers to section VI. of the 

Addendum to this proposed rule. 

Readers who experience any problems 

accessing any of the tables that are 

posted on the CMS Web sites identified 

above should contact Michael Treitel at 

(410) 786–4552. 

Acronyms 

3M 3M Health Information System 

AAMC Association of American Medical 

Colleges 

ACGME Accreditation Council for Graduate 

Medical Education 

ACoS American College of Surgeons 

AHA American Hospital Association 

AHIC American Health Information 

Community 

AHIMA American Health Information 

Management Association 

AHRQ Agency for Healthcare Research and 

Quality 

AJCC American Joint Committee on Cancer 

ALOS Average length of stay 

ALTHA Acute Long Term Hospital 

Association 

AMA American Medical Association 

AMGA American Medical Group 

Association 

AMI Acute myocardial infarction 

AOA American Osteopathic Association 

APR DRG All Patient Refined Diagnosis 

Related Group System 

APRN Advanced practice registered nurse 

ARRA American Recovery and 

Reinvestment Act of 2009, Public Law 

111–5 

ASCA Administrative Simplification 

Compliance Act of 2002, Public Law 107– 

105 

ASITN American Society of Interventional 

and Therapeutic Neuroradiology 

ASPE Assistant Secretary for Planning and 

Evaluation [DHHS] 

ATRA American Taxpayer Relief Act of 

2012, Public Law 112–240 

BBA Balanced Budget Act of 1997, Public 

Law 105–33 

BBRA Medicare, Medicaid, and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement Act 

of 1999, Public Law 106–113 

BIPA Medicare, Medicaid, and SCHIP [State 

Children’s Health Insurance Program] 

Benefits Improvement and Protection Act 

of 2000, Public Law 106–554 

BLS Bureau of Labor Statistics 

CABG Coronary artery bypass graft 

[surgery] 

CAH Critical access hospital 

CARE [Medicare] Continuity Assessment 

Record & Evaluation [Instrument] 

CART CMS Abstraction & Reporting Tool 

CAUTI Catheter-associated urinary tract 

infection 

CBSAs Core-based statistical areas 

CC Complication or comorbidity 

CCN CMS Certification Number 

CCR Cost-to-charge ratio 

CDAC [Medicare] Clinical Data Abstraction 

Center 

CDAD Clostridium difficile-associated 

disease 

CDC Center for Disease Control and 

Prevention 

CERT Comprehensive error rate testing 

CDI Clostridium difficile (C. difficile) 

CFR Code of Federal Regulations 

CLABSI Central line-associated 

bloodstream infection 

CIPI Capital input price index 

CMI Case-mix index 

CMS Centers for Medicare & Medicaid 

Services 

CMSA Consolidated Metropolitan 

Statistical Area 

COBRA Consolidated Omnibus 

Reconciliation Act of 1985, Public Law 99– 

272 

COLA Cost-of-living adjustment 

COPD Chronis obstructive pulmonary 

disease 

CPI Consumer price index 

CQM Clinical quality measure 

CY Calendar year 

DACA Data Accuracy and Completeness 

Acknowledgement 

DPP Disproportionate patient percentage 

DRA Deficit Reduction Act of 2005, Public 

Law 109–171 

DRG Diagnosis-related group 

DSH Disproportionate share hospital 

EBRT External Bean Radiotherapy 

ECI Employment cost index 

eCQM Electronic clinical quality measure 

EDB [Medicare] Enrollment Database 

EHR Electronic health record 

EMR Electronic medical record 

EMTALA Emergency Medical Treatment 

and Labor Act of 1986, Public Law 99–272 

EP Eligible professional 

FAH Federation of American Hospitals 

FDA Food and Drug Administration 

FFY Federal fiscal year 

FPL Federal poverty line 

FQHC Federally qualified health center 

FR Federal Register 

FTE Full-time equivalent 

FY Fiscal year 

GAF Geographic Adjustment Factor 

GME Graduate medical education 

HAC Hospital-acquired condition 

HAI Healthcare-associated infection 

HCAHPS Hospital Consumer Assessment of 

Healthcare Providers and Systems 

HCFA Health Care Financing 

Administration 

HCO High-cost outlier 

HCP Healthcare personnel 

HCRIS Hospital Cost Report Information 

System 

HHA Home health agency 

HHS Department of Health and Human 

Services 

HICAN Health Insurance Claims Account 

Number 

HIPAA Health Insurance Portability and 

Accountability Act of 1996, Public Law 

104–191 

HIPC Health Information Policy Council 

HIS Health information system 

HIT Health information technology 

HMO Health maintenance organization 

HPMP Hospital Payment Monitoring 

Program 

HSA Health savings account 

HSCRC [Maryland] Health Services Cost 

Review Commission 

HSRV Hospital-specific relative value 

HSRVcc Hospital-specific relative value 

cost center 


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HQA Hospital Quality Alliance 

HQI Hospital Quality Initiative 

HwH Hospital-within-hospital 

IBR Intern- and Resident-to-Bed Ratio 

ICD–9–CM International Classification of 

Diseases, Ninth Revision, Clinical 

Modification 

ICD–10–CM International Classification of 

Diseases, Tenth Revision, Clinical 

Modification 

ICD–10–PCS International Classification of 

Diseases, Tenth Revision, Procedure 

Coding System 

ICR Information collection requirement 

ICU Intensive care unit 

IGI IHS Global Insight, Inc. 

IHS Indian Health Service 

IME Indirect medical education 

I–O Input-Output 

IOM Institute of Medicine 

IPF Inpatient psychiatric facility 

IPFQR Inpatient Psychiatric Facility 

Quality Reporting [Program] 

IPPS [Acute care hospital] inpatient 

prospective payment system 

IRF Inpatient rehabilitation facility 

IQR Inpatient Quality Reporting 

LAMCs Large area metropolitan counties 

LOS Length of stay 

LTC–DRG Long-term care diagnosis-related 

group 

LTCH Long-term care hospital 

LTCH QRP Long-Term Care Hospital 

Quality Reporting Program 

MAC Medicare Administrative Contractor 

MAP Measure Application Partnership 

MCC Major complication or comorbidity 

MCE Medicare Code Editor 

MCO Managed care organization 

MDC Major diagnostic category 

MDH Medicare-dependent, small rural 

hospital 

MedPAC Medicare Payment Advisory 

Commission 

MedPAR Medicare Provider Analysis and 

Review File 

MEI Medicare Economic Index 

MGCRB Medicare Geographic Classification 

Review Board 

MIEA–TRHCA Medicare Improvements and 

Extension Act, Division B of the Tax Relief 

and Health Care Act of 2006, Public Law 

109–432 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008, Public Law 

110–275 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Public Law 108–173 

MMEA Medicare and Medicaid Extenders 

Act of 2010, Public Law 111–309 

MMSEA Medicare, Medicaid, and SCHIP 

Extension Act of 2007, Public Law 110–173 

MRHFP Medicare Rural Hospital Flexibility 

Program 

MRSA Methicillin-resistant Staphylococcus 

aureus 

MSA Metropolitan Statistical Area 

MS–DRG Medicare severity diagnosisrelated group 

MS–LTC–DRG Medicare severity long-term 

care diagnosis-related group 

MU Meaningful Use [EHR Incentive 

Program] 

NAICS North American Industrial 

Classification System 

NALTH National Association of Long Term 

Hospitals 

NCD National coverage determination 

NCHS National Center for Health Statistics 

NCQA National Committee for Quality 

Assurance 

NCVHS National Committee on Vital and 

Health Statistics 

NECMA New England County Metropolitan 

Areas 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

NQS National Quality Strategy 

NTIS National Technical Information 

Service 

NTTAA National Technology Transfer and 

Advancement Act of 1991, Public Law 

104–113 

NUBC National Uniform Billing Code 

NVHRI National Voluntary Hospital 

Reporting Initiative 

OACT [CMS] Office of the Actuary 

OBRA 86 Omnibus Budget Reconciliation 

Act of 1986, Public Law 99–509 

OES Occupational employment statistics 

OIG Office of the Inspector General 

OMB [Executive] Office of Management and 

Budget 

ONC Office of the National Coordinator for 

Health Information Technology 

OPM [U.S.] Office of Personnel 

Management 

OQR [Hospital] Outpatient Quality 

Reporting 

O.R. Operating room 

OSCAR Online Survey Certification and 

Reporting [System] 

PAC Postacute care 

PAMA Protecting Access to Medicare Act of 

2014, Public Law 113–93 

PCH PPS-exempt cancer hospital 

PCHQR PPS-exempt cancer hospital quality 

reporting 

PMSAs Primary metropolitan statistical 

areas 

POA Present on admission 

PPI Producer price index 

PPS Prospective payment system 

PRM Provider Reimbursement Manual 

ProPAC Prospective Payment Assessment 

Commission 

PRRB Provider Reimbursement Review 

Board 

PRTFs Psychiatric residential treatment 

facilities 

PSF Provider-Specific File 

PSI Patient safety indicator 

PS&R Provider Statistical and 

Reimbursement [System] 

PQRS Physician Quality Reporting System 

QIG Quality Improvement Group [CMS] 

QRDA Quality Reporting Data Architecture 

RFA Regulatory Flexibility Act, Public Law 

96–354 

RHC Rural health clinic 

RHQDAPU Reporting hospital quality data 

for annual payment update 

RNHCI Religious nonmedical health care 

institution 

RPL Rehabilitation psychiatric long-term 

care (hospital) 

RRC Rural referral center 

RSMR Risk-standardized mortality rate 

RSRR Risk-standard readmission rate 

RTI Research Triangle Institute, 

International 

RUCAs Rural-urban commuting area codes 

RY Rate year 

SAF Standard Analytic File 

SCH Sole community hospital 

SCHIP State Child Health Insurance 

Program 

SCIP Surgical Care Improvement Project 

SFY State fiscal year 

SGR Sustainable Growth Rate 

SIC Standard Industrial Classification 

SNF Skilled nursing facility 

SOCs Standard occupational classifications 

SOM State Operations Manual 

SSI Surgical site infection 

SSI Supplemental Security Income 

SSO Short-stay outlier 

SUD Substance use disorder 

TEFRA Tax Equity and Fiscal 

Responsibility Act of 1982, Public Law 97– 

248 

TEP Technical expert panel 

THA/TKA Total hip arthroplasty/Total 

knee arthroplasty 

TMA TMA [Transitional Medical 

Assistance], Abstinence Education, and QI 

[Qualifying Individuals] Programs 

Extension Act of 2007, Public Law 110–90 

TPS Total Performance Score 

UHDDS Uniform hospital discharge data set 

UMRA Unfunded Mandate Reform Act, 

Public Law 104–4 

VBP [Hospital] Value Based Purchasing 

[Program] 

VTE Venous thromboembolism 

Table of Contents 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose and Legal Authority 

2. Summary of the Major Provisions 

3. Summary of Costs and Benefits 

B. Summary 

1. Acute Care Hospital Inpatient 

Prospective Payment System (IPPS) 

2. Hospitals and Hospital Units Excluded 

From the IPPS 

3. Long-Term Care Hospital Prospective 

Payment System (LTCH PPS) 

4. Critical Access Hospitals (CAHs) 

5. Payments for Graduate Medical 

Education (GME) 

C. Summary of Provisions of Recent 

Legislation Discussed in This Proposed 

Rule 

1. Patient Protection and Affordable Care 

Act (Pub. L. 111–148) and the Health 

Care and Education Reconciliation Act of 

2010 (Pub. L. 111–152) 

2. American Taxpayer Relief Act of 2012 

(Pub. L. 112–240) 

3. Pathway for Sustainable Growth Rate 

(SGR) Reform Act of 2013 (Pub. L. 113– 

67) 

4. Protecting Access to Medicare Act of 

2014 (Pub. L. 113–93) 

D. Summary of the Major Provisions of this 

Proposed Rule 

II. Proposed Changes to Medicare Severity 

Diagnosis-Related Group (MS–DRG) 

Classifications and Relative Weights 

A. Background 

B. MS–DRG Reclassifications 

C. Adoption of the MS–DRGs in FY 2008 

D. Proposed FY 2016 MS–DRG 

Documentation and Coding Adjustment 

1. Background on the Prospective MS–DRG 

Documentation and Coding Adjustments 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24327 

for FY 2008 and FY 2009 Authorized by 

Public Law 110–90 

2. Adjustment to the Average Standardized 

Amounts Required by Public Law 110– 

90 

a. Prospective Adjustment Required by 

Section 7(b)(1)(A) of Public Law 110–90 

b. Recoupment or Repayment Adjustments 

in FYs 2010 Through 2012 Required by 

Section 7(b)(1)(B) Public Law 110–90 

3. Retrospective Evaluation of FY 2008 and 

FY 2009 Claims Data 

4. Prospective Adjustments for FY 2008 

and FY 2009 Authorized by Section 

7(b)(1)(A) of Public Law 110–90 

5. Recoupment or Repayment Adjustment 

Authorized by Section 7(b)(1)(B) of 

Public Law 110–90 

6. Proposed Recoupment or Repayment 

Adjustment Authorized by Section 631 

of the American Taxpayer Relief Act of 

2012 (ATRA) 

E. Refinement of the MS–DRG Relative 

Weight Calculation 

1. Background 

2. Discussion for FY 2016 and Request for 

Comments on Nonstandard Cost Center 

Codes 

F. Proposed Adjustment to MS–DRGs for 

Preventable Hospital-Acquired 

Conditions (HACs), Including Infections, 

for FY 2016 

1. Background 

2. HAC Selection 

3. Present on Admission (POA) Indicator 

Reporting 

4. HACs and POA Reporting in Preparation 

for Transition to ICD–10–CM and ICD– 

10–PCS 

5. Proposed Changes to the HAC Program 

for FY 2016 

6. RTI Program Evaluation 

7. RTI Report on Evidence-Based 

Guidelines 

G. Proposed Changes to Specific MS–DRG 

Classifications 

1. Discussion of Changes to Coding System 

and Basis for MS–DRG Updates 

a. Conversion of MS–DRGs to the 

International Classification of Diseases, 

10th Edition (ICD–10) 

b. Basis for Proposed FY 2016 MS–DRG 

Updates 

2. MDC 1 (Diseases and Disorders of the 

Nervous System): Endovascular 

Embolization (Coiling) Procedures 

3. MDC 5 (Diseases and Disorders of the 

Circulatory System) 

a. Adding Severity Levels to MS–DRGs 245 

Through 251 

b. Percutaneous Intracardiac Procedures 

c. Zilver® PTX Drug-Eluting Peripheral 

Stent (ZPTX®) 

d. Percutaneous Mitral Valve Repair 

System—Proposed Revision of ICD–10– 

PCS Version 32 Logic 

e. Major Cardiovascular Procedures: 

Zenith® Fenestrated Abdominal Aortic 

Aneurysm (AAA) Endovascular Graft 

4. MDC 8 (Diseases and Disorders of the 

Musculoskeletal System and Connective 

Tissue) 

a. Revision of Hip or Knee Replacement: 

Proposed Revision of ICD–10 Version 32 

Logic 

b. Spinal Fusion 

5. MDC 14 (Pregnancy, Childbirth and the 

Puerperium): MS–DRG 775 (Vaginal 

Delivery With Complicating Diagnosis) 

6. MDC 21 (Injuries, Poisoning and Toxic 

Effects of Drugs): CroFab Antivenin Drug 

7. MDC 22 (Burns): Additional Severity of 

Illness Level for MS–DRG 927 (Extensive 

Burns or Full Thickness Burns With 

Mechanical Ventilation 96 + Hours With 

Skin Graft) 

8. Proposed Medicare Code Editor (MCE) 

Changes 

9. Proposed Changes to Surgical 

Hierarchies 

10. Proposed Changes to the MS–DRG 

Diagnosis Codes for FY 2016 

a. Major Complications or Comorbidities 

(MCCs) and Complications or 

Comorbidities (CCs) Severity Levels for 

FY 2016 

b. Coronary Atherosclerosis Due to 

Calcified Coronary Lesion 

c. Hydronephrosis 

11. Proposed Complications or 

Comorbidity (CC) Exclusions List for FY 

2016 

a. Background 

b. Proposed CC Exclusions List for FY 2016 

12. Review of Procedure Codes in MS– 

DRGs 981 Through 983, 984 Through 

986, and 987 Through 989 

a. Moving Procedure Codes From MS– 

DRGs 981 Through 983 or MS–DRGs 987 

Through 989 Into MDCs 

b. Reassignment of Procedures Among MS– 

DRGs 981 Through 983, 984 through 986, 

and 987 Through 989 

c. Adding Diagnosis or Procedure Codes to 

MDCs 

13. Proposed Changes to the ICD–9–CM 

Coding System in FY 2016 

a. ICD–10 Coordination and Maintenance 

Committee 

b. Code Freeze 

14. Other Proposed Policy Change: 

Recalled/Replaced Devices 

H. Recalibration of the Proposed FY 2016 

MS–DRG Relative Weights 

1. Data Sources for Developing the 

Proposed Relative Weights 

2. Methodology for Calculation of the 

Proposed Relative Weights 

3. Development of Proposed National 

Average CCRs 

4. Solicitation of Public Comments on 

Expanding the Bundled Payments for 

Care Improvement (BPCI) Initiative 

a. Background 

b. Considerations for Potential Model 

Expansion 

I. Proposed Add-On Payments for New 

Services and Technologies 

1. Background 

2. Public Input Before Publication of a 

Notice of Proposed Rulemaking on AddOn Payments 

3. Implementation of ICD–10–PCS Section 

‘‘X’’ Codes for Certain New Medical 

Services and Technologies for FY 2016 

4. Proposed FY 2016 Status of 

Technologies Approved for FY 2015 

Add-On Payments 

a. Glucarpidase (Voraxaze®) 

b. Zenith® Fenestrated Abdominal Aortic 

Aneurysm (AAA) Endovascular Graft 

c. KcentraTM

d. Argus® II Retinal Prosthesis System 

e. Zilver®PTX® Drug-Eluting Peripheral 

Stent 

f. CardioMEMSTM HF (Heart Failure) 

Monitoring System 

g. MitraClip® System 

h. Responsive Neurostimulator (RNS®

System) 

5. FY 2016 Applications for New 

Technology Add-On Payments 

a. Angel Medical Guardian® Ischemia 

Monitoring Device 

b. Blinatumomab (BLINCYTOTM) 

c. Ceftazidime Avibactam (AVYCAZ) 

d. DIAMONDBACK® 360 Coronary Orbital 

Atherectomy System 

e. CRESEMBA® (Isavuconazonium) 

f. Idarucizumab 

g. LUTONIX® Drug Coated Balloon (DCB) 

Percutaneous Transluminal Angioplasty 

(PTA) and IN.PACTTMAdmiralTM

Pacliaxel Coated Percutaneous 

Transluminal Angioplasty (PTA) Balloon 

Catheter 

h. VERASENSETM Knee Balancer System 

(VKS) 

i. WATCHMAN® Left Atrial Appendage 

Closure Technology 

III. Proposed Changes to the Hospital Wage 

Index for Acute Care Hospitals 

A. Background 

1. Legislative Authority 

2. Core-Based Statistical Areas (CBSAs) for 

the Hospital Wage Index 

B. Worksheet S–3 Wage Data for the 

Proposed FY 2016 Wage Index 

1. Included Categories of Costs 

2. Excluded Categories of Costs 

3. Use of Wage Index Data by Suppliers 

and Providers Other Than Acute Care 

Hospitals Under the IPPS 

C. Verification of Worksheet S–3 Wage 

Data 

D. Method for Computing the Proposed FY 

2016 Unadjusted Wage Index 

E. Proposed Occupational Mix Adjustment 

to the Proposed FY 2016 Wage Index 

1. Development of Data for the Proposed 

FY 2016 Occupational Mix Adjustment 

Based on the 2013 Medicare Wage Index 

Occupational Mix Survey 

2. New 2013 Occupational Mix Survey 

Data for the Proposed FY 2016 Wage 

Index 

3. Calculation of the Proposed 

Occupational Mix Adjustment for FY 

2016 

F. Analysis and Implementation of the 

Proposed Occupational Mix Adjustment 

and the Proposed FY 2016 Occupational 

Mix Adjusted Wage Index 

G. Transitional Wage Indexes 

1. Background 

2. Transition for Hospitals in Urban Areas 

That Became Rural 

3. Transition for Hospitals Deemed Urban 

Under Section 1886(d)(8)(B) of the Act 

Where the Urban Area Became Rural 

Under the New OMB Delineations 

4. Expiring Transition for Hospitals That 

Experience a Decrease in Wage Index 

under the New OMB Delineations 

5. Budget Neutrality 

H. Proposed Application of the Rural, 

Imputed, and Frontier Floors 

1. Proposed Rural Floor 


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2. Proposed Imputed Floor for FY 2016 

3. Proposed State Frontier Floor 

I. Proposed FY 2016 Wage Index Tables 

J. Revisions to the Wage Index Based on 

Hospital Redesignations and 

Reclassifications 

1. General Policies and Effects of 

Reclassification and Redesignation 

2. FY 2016 MGCRB Reclassifications and 

Redesignation Issues 

a. FY 2016 Reclassification Requests and 

Approvals 

b. Applications for Reclassifications for FY 

2017 

3. Redesignations of Hospitals Under 

Section 1886(d)(8)(B) of the Act (Lugar) 

4. Waiving Lugar Redesignation for the 

Out-Migration Adjustment 

K. Proposed Out-Migration Adjustment 

Based on Commuting Patterns of 

Hospital Employees 

1. Background 

2. New Data Source for the Proposed FY 

2016 Out-Migration Adjustment 

3. Proposed FY 2016 Out-Migration 

Adjustment 

4. Use of Out-Migration Data Applied for 

FY 2014 or FY 2015 for 3 Years 

L. Process for Requests for Wage Index 

Data Corrections 

M. Labor-Related Share for the Proposed 

FY 2016 Wage Index 

N. Proposed Changes to 3-Year Average for 

the FY 2017 Wage Index Pension Costs 

and Proposed Change to Wage Index 

Timeline Regarding Pension Costs for FY 

2017 and Subsequent Years 

O. Clarification of Allocation of Pension 

Costs for the Wage Index 

IV. Other Decisions and Proposed Changes to 

the IPPS for Operating Costs and Indirect 

Medical Education (IME) Costs 

A. Proposed Changes in the Inpatient 

Hospital Updates for FY 2016 

(§§ 412.64(d) and 412.211(c)) 

1. Proposed FY 2016 Inpatient Hospital 

Update 

2. Proposed FY 2016 Puerto Rico Hospital 

Update 

B. Rural Referral Centers (RRCs): Proposed 

Annual Updates to Case-Mix Index (CMI) 

and Discharge Criteria (§ 412.96) 

1. Case-Mix Index (CMI) 

2. Discharges 

C. Indirect Medical Education (IME) 

Payment Adjustment for FY 2016 

(§ 412.105) 

D. Proposed FY 2016 Payment Adjustment 

for Medicare Disproportionate Share 

Hospitals (DSHs) (§ 412.106) 

1. Background 

2. Impact on Medicare DSH Payment 

Adjustment of the Continued 

Implementation of New OMB Labor 

Market Area Delineations 

3. Payment Adjustment Methodology for 

Medicare Disproportionate Share 

Hospitals (DSHs) Under Section 3133 of 

the Affordable Care Act 

a. General Discussion 

b. Eligibility for Empirically Justified 

Medicare DSH Payments and 

Uncompensated Care Payments 

c. Empirically Justified Medicare DSH 

Payments 

d. Uncompensated Care Payments 

E. Hospital Readmissions Reduction 

Program: Proposed Changes for FY 2016 

Through FY 2017 (§§ 412.150 Through 

412.154) 

1. Statutory Basis for the Hospital 

Readmissions Reduction Program 

2. Regulatory Background 

3. Overview of Proposed Policies Changes 

for the FY 2016 and FY 2017 Hospital 

Readmissions Reduction Program 

4. Proposed Refinement of Hospital 30- 

Day, All Cause, Risk-Standardized 

Readmission Rate (RSSR) Following 

Pneumonia Hospitalization Measure 

Cohort (NQF #0506) for FY 2017 

Payment Determination and Subsequent 

Years 

a. Background 

b. Overview of Measure Cohort Change 

c. Risk Adjustment 

d. Anticipated Effect of Refinement of 

Hospital 30-Day, All-Cause, RiskStandardized Readmission Rate (RSSR) 

Following Pneumonia Hospitalization 

Measure (NQF #0506) Cohort 

e. Calculating the Excess Readmissions 

Ratio 

5. Maintenance of Technical Specifications 

for Quality Measures 

6. Floor Adjustment Factor for FY 2016 

(§ 412.154(c)(2)) 

7. Proposed Applicable Period for FY 2016 

8. Proposed Calculation of Aggregate 

Payments for Excess Readmissions for 

FY 2016 

a. Background 

b. Proposed Calculation of Aggregate 

Payments for Excess Readmissions for 

FY 2016 

9. Proposed Extraordinary Circumstances 

Exception Policy for the Hospital 

Readmissions Reduction Program 

Beginning FY 2016 and for Subsequent 

Years 

a. Background 

b. Requests for an Extraordinary 

Circumstances Exception 

F. Hospital Value-Based Purchasing (VBP) 

Program: Proposed Policy Changes for 

the FY 2018 Program Year and 

Subsequent Years 

1. Background 

a. Statutory Background and Overview of 

Past Program Years 

b. FY 2016 Program Year Payment Details 

2. Proposed Retention, Removal, 

Expansion, and Updating of Quality 

Measures for FY 2018 Program Year 

a. Retention of Previously Adopted 

Hospital VBP Program Measures for the 

FY 2018 Program Year 

b. Proposed Removal of Two Measures 

c. Proposed New Measure for the FY 2018 

Program Year: 3-Item Care Transition 

Measure (CTM–3) (NQF #0228) 

d. Proposed Removal of Clinical Care— 

Process Subdomain for the FY 2018 

Program Year and Subsequent Years 

e. NHSN Measures Standard Population 

Data 

f. Summary of Previously Adopted and 

Newly Proposed Measures for the FY 

2018 Program Year 

3. Previously Adopted and Newly 

Proposed Measures for the FY 2019, FY 

2021, and Subsequent Program Years 

a. Intent To Propose in Future Rulemaking 

To Include Selected Ward (NonIntensive Care Unit (ICU)) Locations in 

Certain NHSN Measures Beginning With 

the FY 2019 Program Year 

b. Proposed New Measure for the FY 2021 

Program Year: Hospital 30-Day, AllCause, Risk-Standardized Mortality Rate 

Following Chronic Obstructive 

Pulmonary Disease (COPD) 

Hospitalization (NQF #1893) 

c. Summary of Previously Adopted and 

Newly Proposed Measures for the FY 

2019 and FY 2021 and Subsequent 

Program Years 

4. Possible Measure Topics for Future 

Program Years 

5. Previously Adopted and Newly 

Proposed Baseline and Performance 

Periods for the FY 2018 Program Year 

a. Background 

b. Proposed Baseline and Performance 

Periods for the Patient and CaregiverCentered Experience of Care/Care 

Coordination Domain for the FY 2018 

Program Year 

c. Proposed Baseline and Performance 

Periods for NHSN Measures and PC–01 

in the Safety Domain for the FY 2018 

Program Year 

d. Proposed Baseline and Performance 

Periods for the Efficiency and Cost 

Reduction Domain for the FY 2018 

Program Year 

e. Summary of Previously Finalized and 

Newly Proposed Baseline and 

Performance Periods for the FY 2018 

Program Year 

6. Previously Adopted and Newly 

Proposed Baseline and Performance 

Periods for Future Program Years 

a. Previously Adopted Baseline and 

Performance Periods for the FY 2019 

Program 

b. Proposed Baseline and Performance 

Periods for the PSI–90 Measure in the 

Safety Domain in the FY 2020 Program 

Years 

c. Proposed Baseline and Performance 

Periods for the Clinical Care Domain for 

the FY 2021 Program Year 

7. Proposed Performance Standards for the 

Hospital VBP Program 

a. Background 

b. Technical Updates 

c. Proposed Performance Standards for the 

FY 2018 Program Year 

d. Previously Adopted Performance 

Standards for Certain Measures for the 

FY 2019 Program Year 

e. Previously Adopted and Newly 

Proposed Performance Standards for 

Certain Measures for the FY 2020 

Program Year 

f. Proposed Performance Standards for 

Certain Measures for the FY 2021 

Program Year 

8. Proposed FY 2018 Program Year Scoring 

Methodology 

a. Proposed Domain Weighting for the FY 

2018 Program Year for Hospitals That 

Receive a Score on All Domains 

b. Proposed Domain Weighting for the FY 

2018 Program Year for Hospitals 

Receiving Scores on Fewer Than Four 

Domains 


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G. Proposed Changes to the HospitalAcquired Condition (HAC) Reduction 

Program 

1. Background 

2. Statutory Basis for the HAC Reduction 

Program 

3. Overview of Previous HAC Reduction 

Program Rulemaking 

4. Implementation of the HAC Reduction 

Program for FY 2016 

5. Proposed Changes for Implementation of 

the HAC Reduction Program for FY 2017 

a. Proposed Applicable Time Period for the 

FY 2017 HAC Reduction Program 

b. Proposed Narrative Rule Used in 

Calculation of the Domain 2 Score for the 

FY 2017 HAC Reduction Program 

c. Proposed Domain 1 and Domain 2 

Weights for the FY 2017 HAC Reduction 

Program 

6. Proposed Measure Refinements for the 

FY 2018 HAC Reduction Program 

a. Proposal To Include Select Ward (NonIntensive Care Unit (ICU)) Locations in 

Certain CDC NHSN Measures Beginning 

in the FY 2018 Program Year 

b. Update to CDC NHSN Measures 

Standard Population Data 

7. Maintenance of Technical Specifications 

for Quality Measures 

8. Proposed Extraordinary Circumstances 

Exception Policy for the HAC Reduction 

Program Beginning in FY 2016 and for 

Subsequent Years 

a. Background 

b. Requests for an Extraordinary 

Circumstances Exception 

H. Proposed Elimination of Simplified Cost 

Allocation Methodology 

1. Background 

2. Proposed Changes 

I. Rural Community Hospital 

Demonstration Program 

1. Background 

2. Proposed FY 2016 Budget Neutrality 

Offset Amount 

J. Proposed Changes to MS–DRGs Subject 

to the Postacute Care Transfer Policy 

(§ 412.4) 

1. Background 

2. Proposed Changes to the Postacute Care 

Transfer MS–DRGs 

K. Short Inpatient Hospital Stays 

V. Proposed Changes to the IPPS for CapitalRelated Costs 

A. Overview 

B. Additional Provisions 

1. Exception Payments 

2. New Hospitals 

3. Hospitals Located in Puerto Rico 

C. Proposed Annual Update for FY 2016 

VI. Proposed Changes for Hospitals Excluded 

From the IPPS 

VII. Proposed Changes to the Long-Term Care 

Hospital Prospective Payment System 

(LTCH PPS) for FY 2016 

A. Background of the LTCH PPS 

1. Legislative and Regulatory Authority 

2. Criteria for Classification as an LTCH 

a. Classification as an LTCH 

b. Hospitals Excluded From the LTCH PPS 

3. Limitation on Charges to Beneficiaries 

4. Administrative Simplification 

Compliance Act (ASCA) and Health 

Insurance Portability and Accountability 

Act (HIPAA) Compliance 

B. Proposed Application of Site Neutral 

Payment Rate (Proposed New § 412.522) 

1. Overview 

2. Proposed Application of the Site Neutral 

Payment Rate Under the LTCH PPS 

3. Criteria for Exclusion From the Site 

Neutral Payment Rate 

a. Statutory Provisions 

b. Proposed Implementation of Criterion 

for a Principal Diagnosis Relating to a 

Psychiatric Diagnosis or to Rehabilitation 

c. Proposed Addition of Definition of 

‘‘Subsection (d) Hospital’’ to LTCH 

Regulations 

d. Proposed Interpretation of ‘‘Immediately 

Preceded’’ by a Subsection (d) Hospital 

Discharge 

e. Proposed Implementation of Intensive 

Care Unit (ICU) Criterion 

f. Proposed Implementation of the 

Ventilator Criterion 

4. Proposed Determination of the Site 

Neutral Payment Rate (Proposed New 

§ 412.522(c)) 

a. General 

b. Proposed Blended Payment Rate for FY 

2016 and FY 2017 

c. Proposed LTCH PPS Standard Federal 

Payment Rate 

5. Proposed Application of Certain Exiting 

LTCH PPS Payment Adjustments to 

Payments Made Under the Site Neutral 

Payment Rate 

6. Proposals Relating to the LTCH 

Discharge Payment Percentage 

7. Additional LTCH PPS Policy 

Considerations Related to the 

Implementation of the Site Neutral 

Payment Rate Required by Section 

1206(a) of Public Law 113–67 

a. MS–LTC–DRG Relative Payment 

Weights 

b. High-Cost Outliers 

c. Limitation on Charges to Beneficiaries 

C. Proposed Medicare Severity Long-Term 

Care Diagnosis-Related Group (MS–LTC– 

DRG) Classifications and Relative 

Weights for FY 2016 

1. Background 

2. Patient Classifications into MS–LTC– 

DRGs 

a. Background 

b. Proposed Changes to the MS–LTC–DRGs 

for FY 2016 

3. Development of the Proposed FY 2016 

MS–LTC–DRG Relative Weights 

a. General Overview of the Development of 

the MS–LTC–DRG Relative Weights 

b. Development of the Proposed MS–LTC– 

DRG Relative Weights for FY 2016 

c. Data 

d. Hospital-Specific Relative Value (HSRV) 

Methodology 

e. Treatment of Severity Levels in 

Developing the Proposed MS–LTC–DRG 

Relative Weights 

f. Proposed Low-Volume MS–LTC–DRGs 

g. Steps for Determining the Proposed FY 

2016 MS–LTC–DRG Relative Weights 

D. Proposed Changes to the LTCH PPS 

Standard Payment Rates for FY 2016 

1. Overview of Development of the LTCH 

PPS Standard Federal Payment Rates 

2. Proposed FY 2016 LTCH PPS Annual 

Market Basket Update 

a. Overview 

b. Proposed Revision of Certain Market 

Basket Updates as Required by the 

Affordable Care Act 

c. Proposed Adjustment to the Annual 

Update to the LTCH PPS Standard 

Federal Rate Under the Long-Term Care 

Hospital Quality Reporting Program 

(LTCH QRP) 

d. Proposed Market Basket Under the 

LTCH PPS for FY 2016 

e. Proposed Annual Market Basket Update 

for LTCHs for FY 2016 

E. Moratoria on the Establishment of 

LTCHs and LTCH Satellite Facilities and 

on the Increase in Number of Beds in 

Existing LTCHs and LTCH Satellite 

Facilities 

F. Proposed Changes to Average Length of 

Stay Criterion Under Public Law 113–67 

(§ 412.23) 

VIII. Proposed Quality Data Reporting 

Requirements for Specific Providers and 

Suppliers for FY 2016 

A. Hospital Inpatient Quality Reporting 

(IQR) Program 

1. Background 

a. History of the Hospital IQR Program 

b. Maintenance of Technical Specifications 

for Quality Measures 

c. Public Display of Quality Measures 

2. Process for Retaining Previously 

Adopted Hospital IQR Program Measures 

for Subsequent Payment Determinations 

3. Removal and Suspension of Hospital 

IQR Program Measures 

a. Considerations in Removing Quality 

Measures From the Hospital IQR 

Program 

b. Proposed Removal of Hospital IQR 

Program Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

4. Previously Adopted Hospital IQR 

Program Measures for the FY 2017 

Payment Determination and Subsequent 

Years 

a. Background 

b. NHSN Measures Standard Population 

Data 

5. Expansion and Updating of Quality 

Measures 

6. Proposed Refinements of Existing 

Measures in the Hospital IQR Program 

a. Proposed Refinement of Hospital 30-Day, 

All-Cause, Risk-Standardized Mortality 

Rate (RSMR) Following Pneumonia 

Hospitalization (NQF #0468) Measure 

Cohort 

b. Proposed Refinement of Hospital 30- 

Day, All-Cause, Risk-Standardized 

Readmission Rate (RSRR) Following 

Pneumonia Hospitalization (NQF #0468) 

Measure Cohort 

7. Proposed Additional Hospital IQR 

Program Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

a. Hospital Survey on Patient Safety 

Culture 

b. Clinical Episode-Based Payment 

Measures 

c. Hospital-Level, Risk-Standardized 

Payment Associated With a 90-Day 

Episode-of-Care for Elective Primary 

Total Hip Arthroplasty (THA) and/or 

Total Knee Arthroplasty (TKA) 


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d. Excess Days in Acute Care After 

Hospitalization for Acute Myocardial 

Infarction 

e. Excess Days in Acute Care After 

Hospitalization for Heart Failure 

f. Summary of Previously Adopted and 

Proposed Hospital IQR Program Measure 

Set for the FY 2018 Payment 

Determination and Subsequent Years 

8. Electronic Clinical Quality Measures 

a. Previously Adopted Voluntarily 

Reported Electronic Clinical Quality 

Measures for the FY 2017 Payment 

Determination 

b. Clarification of the Venous 

Thromboembolism (VTE) Prophylaxis 

(STK–01) Measure (NQF #0434) 

c. Proposed Requirements for Hospitals To 

Report Electronic Clinical Quality 

Measures for the FY 2018 Payment 

Determination and Subsequent Years 

9. Future Considerations for Electronically 

Specified Measures: Consideration To 

Implement a New Type of Measure That 

Utilizes Core Clinical Data Elements 

a. Background 

b. Overview of Core Clinical Data Elements 

c. Core Clinical Data Elements 

Development 

d. Core Clinical Data Elements Feasibility 

Testing Using Readmission and 

Mortality Models 

e. Use of Core Clinical Data Elements in 

Hospital Quality Measures for the 

Hospital IQR Program 

f. Content Exchange Standard 

Considerations for Core Clinical Data 

Elements 

10. Form, Manner, and Timing of Quality 

Data Submission 

a. Background 

b. Procedural Requirements for the FY 

2018 Payment Determination and 

Subsequent Years 

c. Data Submission Requirements for 

Chart-Abstracted Measures 

d. Alignment of the Medicare EHR 

Incentive Program Reporting for Eligible 

Hospitals and CAHs With the Hospital 

IQR Program 

e. Sampling and Case Thresholds for the 

FY 2018 Payment Determination and 

Subsequent Years 

f. HCAHPS Requirements for the FY 2018 

Payment Determination and Subsequent 

Years 

g. Data Submission Requirements for 

Structural Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

h. Data Submission and Reporting 

Requirements for Healthcare-Associated 

Infection (HAI) Measures Reported via 

NHSN 

11. Proposed Modifications to the Existing 

Processes for Validation of Hospital IQR 

Program Data 

a. Background 

b. Proposed Modifications to the Existing 

Processes for Validation of ChartAbstracted Hospital IQR Program Data 

12. Data Accuracy and Completeness 

Acknowledgement Requirements for the 

FY 2018 Payment Determination and 

Subsequent Years 

13. Public Display Requirements for the FY 

2018 Payment Determination and 

Subsequent Years 

14. Reconsideration and Appeal 

Procedures for the FY 2018 Payment 

Determination and Subsequent Years 

15. Hospital IQR Program Extraordinary 

Circumstances Extensions or Exemptions 

B. PPS-Exempt Cancer Hospital Quality 

Reporting (PCHQR) Program 

1. Statutory Authority 

2. Proposed Removal of Six Surgical Care 

Improvement Project (SCIP) Measures 

From the PCHQR Program Beginning 

With Fourth Quarter (Q4) 2015 

Discharges and for Subsequent Years 

3. Proposed New Quality Measures 

Beginning With the FY 2018 Program 

a. Considerations in the Selection of 

Quality Measures 

b. Summary of Proposed New Measures 

c. CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Clostridium difficile (C. 

difficile) Infection (CDI) Outcome 

Measure (NQF #1717) 

d. CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Methicillin-Resistant 

Staphylococcus Aureus (MSRA) 

Bacteremia Outcome Measure (NQF 

#1716) 

e. CDC NHSN Influenza Vaccination 

Coverage Among Healthcare Personnel 

(HCP) Measure (NQF #0431) (CDC NHSN 

HCP Measure) 

4. Possible New Quality Measure Topics 

for Future Years 

5. Maintenance of Technical Specifications 

for Quality Measures 

6. Public Display Requirements 

a. Background 

b. Proposed Additional Public Display 

Requirements 

7. Form, Manner, and Timing of Data 

Submission 

a. Background 

b. Reporting Requirements for the 

Proposed New Measures: CDC NHSN 

CDI (NQF #1717), CDC NHSN MRSA 

(NQF #1716), and CDC NHSN HCP (NQF 

#0431) Measures 

C. Long-Term Care Hospital Quality 

Reporting Program (LTCH QRP) 

1. Background and Statutory Authority 

2. General Considerations Used for 

Selection, Resource Use, and Other 

Quality Measures for the LTCH QRP 

3. Policy for Retention of LTCH QRP 

Measures Adopted for Previous Payment 

Determinations 

4. Policy for Adopting Changes to LTCH 

QRP Measures 

5. Previously Adopted Quality Measures 

a. Previously Adopted Quality Measures 

for the FY 2015 and FY 2016 Payment 

Determinations and Subsequent Years 

b. Previously Adopted Quality Measures 

for the FY 2017 and FY 2018 Payment 

Determinations and Subsequent Years 

6. Previously Adopted LTCH QRP Quality 

Measures for the FY 2018 Payment 

Determinations and Subsequent Years 

a. Proposal To Reflect NQF Endorsement: 

All-Cause Unplanned Readmission 

Measure for 30 Days Post-Discharge 

From LTCHs (NQF #2512) 

b. Proposal To Address the IMPACT Act of 

2014: Quality Measure Addressing the 

Domain of Skin Integrity and Changes in 

Skin Integrity: Percent of Residents or 

Patients With Pressure Ulcers That Are 

New or Worsened (Short Stay) (NQF 

#0678) 

c. Proposal To Address the IMPACT Act of 

2014: Quality Measure Addressing the 

Domain of Incidence of Major Falls: 

Application of Percent of Residents 

Experiencing One or More Falls With 

Major Injury (Long Stay) (NQF #0674) 

d. Proposal To Address the IMPACT Act of 

2014: Quality Measure Addressing the 

Domain of Functional Status, Cognitive 

Function, and Changes in Function and 

Cognitive Function: Application of 

Percent of LTCH Patients With an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function (NQF #2631; Under 

NQF Review) 

7. LTCH QRP Quality Measures for the FY 

2019 Payment Determination and 

Subsequent Years 

8. LTCH QRP Quality Measures and 

Concepts Under Consideration for Future 

Years 

9. Form, Manner, and Timing of Quality 

Data Submission for the FY 2016 

Payment Determinations and Subsequent 

Years 

a. Background 

b. Proposed Timing for New LTCHs To 

Begin Reporting Data to CMS for the FY 

2017 Payment Determinations and 

Subsequent Years 

c. Proposed Revisions to Previously 

Adopted Data Submission Timelines 

Under the LTCH QRP for the FY 2017 

and FY 2018 Payment Determinations 

and Subsequent Years and Proposed 

Data Collection and Data Submission 

Timelines for Quality Measures 

Proposed in This Proposed Rule 

10. Previously Adopted LTCH QRP Data 

Completion Thresholds for the FY 2016 

Payment Determination and Subsequent 

Years 

11. Future LTCH QRP Data Validation 

Process 

12. Proposed Public Display of Quality 

Measure Data for the LTCH QRP 

13. Previously Adopted and Proposed 

LTCH QRP Reconsideration and Appeals 

Procedures for the FY 2017 Payment 

Determination and Subsequent Years 

14. Previously Adopted and Proposed 

LTCH QRP Submission Exception and 

Extension Requirements for the FY 2017 

Payment Determination and Subsequent 

Years 

D. Clinical Quality Measurement for 

Eligible Hospitals and Critical Access 

Hospitals Participating in the EHR 

Incentive Programs in 2016 

1. Background 

2. CQM Reporting for the Medicare and 

Medicaid EHR Incentive Programs in 

2016 

a. Background 

b. Proposed CQM Reporting Period for the 

Medicare and Medicaid EHR Incentive 

Programs for CY 2016 

c. CQM Form and Method for the Medicare 

EHR Incentive Programs for 2016 

3. Certified EHR Technology for CQMs for 

the EHR Incentive Programs in 2016 


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a. Edition of Certified EHR Technology 

Requirements for 2016 

b. ‘‘CQM—Report’’ Certification Criterion 

in ONC’s 2015 Edition Proposed Rule 

4. CQM Development and Certification 

Cycle 

IX. MedPAC Recommendations 

X. Other Required Information 

A. Requests for Data From the Public 

B. Collection of Information Requirements 

1. Statutory Requirement for Solicitation of 

Comments 

2. ICRs for Add-On Payments for New 

Services and Technologies 

3. ICRs for the Proposed Occupational Mix 

Adjustment to the Proposed FY 2016 

Wage Index (Hospital Wage Index 

Occupational Mix Survey) 

4. Hospital Applications for Geographic 

Reclassifications by the MGCRB 

5. ICRs for the Hospital Inpatient Quality 

Reporting (IQR) Program 

6. ICRs for PPS-Exempt Cancer Hospital 

Quality Reporting (PCHQR) Program 

7. ICRs for Hospital Value-Based 

Purchasing (VBP) Program 

8. ICRs for the Long-Term Care Hospital 

Quality Reporting Program (LTCHQR) 

C. Response to Comments 

Regulation Text 

Addendum—Proposed Schedule of 

Standardized Amounts, Update Factors, 

and Rate-of-Increase Percentages 

Effective With Cost Reporting Periods 

Beginning on or After October 1, 2015 

and Proposed Payment Rates for LTCHs 

Effective With Discharges Occurring on 

or After October 1, 2015 

I. Summary and Background 

II. Proposed Changes to the Prospective 

Payment Rates for Hospital Inpatient 

Operating Costs for Acute Care Hospitals 

for FY 2016 

A. Calculation of the Adjusted 

Standardized Amount 

B. Adjustments for Area Wage Levels and 

Cost-of-Living 

C. Proposed MS–DRG Relative Weights 

D. Calculation of the Prospective Payment 

Rates 

III. Proposed Changes to Payment Rates for 

Acute Care Hospital Inpatient CapitalRelated Costs for FY 2016 

A. Determination of Federal Hospital 

Inpatient Capital-Related Prospective 

Payment Rate Update 

B. Calculation of the Proposed Inpatient 

Capital-Related Prospective Payments for 

FY 2016 

C. Capital Input Price Index 

IV. Proposed Changes to Payment Rates for 

Excluded Hospitals: Rate-of-Increase 

Percentages for FY 2016 

V. Proposed Updates to the Payment Rates 

for the LTCH PPS for FY 2016 

A. Proposed LTCH PPS Standard Federal 

Rate for FY 2016 

1. Background 

2. Development of the Proposed FY 2016 

LTCH PPS Standard Federal Rate 

B. Proposed Adjustment for Area Wage 

Levels Under the LTCH PPS Standard 

Federal Payment Rate for FY 2016 

1. Background 

2. Proposed Geographic Classifications 

(Labor Market Areas) for the LTCH PPS 

Standard Federal Payment Rate 

3. Proposed Labor-Related Share for the 

LTCH PPS Standard Federal Payment 

Rate 

4. Proposed Wage Index for FY 2016 for the 

LTCH PPS Standard Federal Payment 

Rate 

5. Proposed Budget Neutrality Adjustment 

for Proposed Changes to the LTCH PPS 

Standard Federal Payment Rate Area 

Wage Level Adjustment 

C. Proposed LTCH PPS Cost-of-Living 

Adjustment (COLA) for LTCHs Located 

in Alaska and Hawaii 

D. Proposed Adjustment for LTCH PPS 

High-Cost Outlier (HCO) Cases 

1. Overview 

2. Determining Proposed LTCH CCRs 

Under the LTCH PPS 

3. Proposed High-Cost Outlier Payments 

for LTCH PPS Standard Federal Payment 

Rate Cases 

4. Proposed High-Cost Outlier Payments 

for Site Neutral Payment Rate Cases 

E. Proposed Update to the IPPS 

Comparable/Equivalent Amounts To 

Reflect the Statutory Changes to the IPPS 

DSH Payment Adjustment Methodology 

F. Computing the Proposed Adjusted LTCH 

PPS Federal Prospective Payments for 

FY 2016 

VI. Tables Referenced in This Proposed Rule 

and Available Through the Internet on 

the CMS Web site 

Appendix A—Economic Analyses 

I. Regulatory Impact Analysis 

A. Introduction 

B. Need 

C. Objectives of the IPPS 

D. Limitations of Our Analysis 

E. Hospitals Included in and Excluded 

From the IPPS 

F. Effects on Hospitals and Hospital Units 

Excluded From the IPPS 

G. Quantitative Effects of the Proposed 

Policy Changes Under the IPPS for 

Operating Costs 

1. Basis and Methodology of Estimates 

2. Analysis of Table I 

3. Impact Analysis of Table II 

H. Effects of Other Proposed Policy 

Changes 

1. Effects of Proposed Policy on MS–DRGs 

for Preventable HACs, Including 

Infections 

2. Effects of Proposed Policy Relating to 

New Medical Service and Technology 

Add-On Payments 

3. Effects of Proposed Changes in Medicare 

DSH Payments for FY 2016 

4. Effects of Proposed Reductions Under 

the Hospital Readmissions Reduction 

Program 

5. Effects of Proposed Changes Under the 

FY 2016 Hospital Value-Based 

Purchasing (VBP) Program 

6. Effects of Proposed Changes to the HAC 

Reduction Program for FY 2016 

7. Effects of Proposed Elimination of the 

Simplified Cost Allocation Methodology 

8. Effects of Implementation of Rural 

Community Hospital Demonstration 

Program 

9. Effects of Proposed Changes to List of 

MS–DRGs Subject to Postacute Care 

Transfer and DRG Special Pay Policy 

I. Effects of Proposed Changes in the 

Capital IPPS 

1. General Considerations 

2. Results 

J. Effects of Proposed Payment Rate 

Changes and Proposed Policy Changes 

Under the LTCH PPS 

1. Introduction and General Considerations 

2. Impact on Rural Hospitals 

3. Anticipated Effects of Proposed LTCH 

PPS Payment Rate Changes and 

Proposed Policy Changes 

4. Effect on the Medicare Program 

5. Effect on Medicare Beneficiaries 

K. Effects of Proposed Requirements for 

Hospital Inpatient Quality Reporting 

(IQR) Program 

L. Effects of Proposed Requirements for the 

PPS-Exempt Cancer Hospital Quality 

Reporting (PCHQR) Program for FY 2016 

M. Effects of Proposed Requirements for 

the LTCH Quality Reporting Program 

(LTCH QRP) for FY 2016 Through FY 

2020 

N. Effects of Proposed Changes to Clinical 

Quality Measurement for Eligible 

Hospitals and Critical Access Hospitals 

Participating in the EHR Incentive 

Programs in 2016 

II. Alternatives Considered 

III. Overall Conclusion 

A. Acute Care Hospitals 

B. LTCHs 

IV. Accounting Statements and Tables 

A. Acute Care Hospitals 

B. LTCHs 

V. Regulatory Flexibility Act (RFA) Analysis 

VI. Impact on Small Rural Hospitals 

VII. Unfunded Mandate Reform Act (UMRA) 

Analysis 

VIII. Executive Order 12866 

Appendix B: Recommendation of Update 

Factors for Operating Cost Rates of 

Payment for Inpatient Hospital Services 

I. Background 

II. Proposed Inpatient Hospital Updates for 

FY 2016 

A. Proposed FY 2016 Inpatient Hospital 

Update 

B. Proposed Update for SCHs for FY 2016 

C. Proposed FY 2016 Puerto Rico Hospital 

Update 

D. Proposed Update for Hospitals Excluded 

From the IPPS for FY 2016 

E. Proposed Update for LTCHs for FY 2016 

III. Secretary’s Recommendation 

IV. MedPAC Recommendation for Assessing 

Payment Adequacy and Updating 

Payments in Traditional Medicare 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose and Legal Authority 

This proposed rule would make 

payment and policy changes under the 

Medicare inpatient prospective payment 

systems (IPPS) for operating and capitalrelated costs of acute care hospitals as 

well as for certain hospitals and hospital 

units excluded from the IPPS. In 

addition, it would make payment and 

policy changes for inpatient hospital 

services provided by long-term care 

hospitals (LTCHs) under the long-term 

care hospital prospective payment 


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system (LTCH PPS). It also would make 

policy changes to programs associated 

with Medicare IPPS hospitals, IPPSexcluded hospitals, and LTCHs. 

Under various statutory authorities, 

we are proposing to make changes to the 

Medicare IPPS, to the LTCH PPS, and to 

other related payment methodologies 

and programs for FY 2016 and 

subsequent fiscal years. These statutory 

authorities include, but are not limited 

to, the following: 

• Section 1886(d) of the Social 

Security Act (the Act), which sets forth 

a system of payment for the operating 

costs of acute care hospital inpatient 

stays under Medicare Part A (Hospital 

Insurance) based on prospectively set 

rates. Section 1886(g) of the Act requires 

that, instead of paying for capital-related 

costs of inpatient hospital services on a 

reasonable cost basis, the Secretary use 

a prospective payment system (PPS). 

• Section 1886(d)(1)(B) of the Act, 

which specifies that certain hospitals 

and hospital units are excluded from the 

IPPS. These hospitals and units are: 

Rehabilitation hospitals and units; 

LTCHs; psychiatric hospitals and units; 

children’s hospitals; cancer hospitals; 

and short-term acute care hospitals 

located in the Virgin Islands, Guam, the 

Northern Mariana Islands, and 

American Samoa. Religious nonmedical 

health care institutions (RNHCIs) are 

also excluded from the IPPS. 

• Sections 123(a) and (c) of Public 

Law 106–113 and section 307(b)(1) of 

Public Law 106–554 (as codified under 

section 1886(m)(1) of the Act), which 

provide for the development and 

implementation of a prospective 

payment system for payment for 

inpatient hospital services of long-term 

care hospitals (LTCHs) described in 

section 1886(d)(1)(B)(iv) of the Act. 

• Sections 1814(l), 1820, and 1834(g) 

of the Act, which specify that payments 

are made to critical access hospitals 

(CAHs) (that is, rural hospitals or 

facilities that meet certain statutory 

requirements) for inpatient and 

outpatient services and that these 

payments are generally based on 101 

percent of reasonable cost. 

• Section 1866(k) of the Act, as added 

by section 3005 of the Affordable Care 

Act, which establishes a quality 

reporting program for hospitals 

described in section 1886(d)(1)(B)(v) of 

the Act, referred to as ‘‘PPS-Exempt 

Cancer Hospitals.’’ 

• Section 1886(d)(4)(D) of the Act, 

which addresses certain hospitalacquired conditions (HACs), including 

infections. Section 1886(d)(4)(D) of the 

Act specifies that, by October 1, 2007, 

the Secretary was required to select, in 

consultation with the Centers for 

Disease Control and Prevention (CDC), 

at least two conditions that: (a) Are high 

cost, high volume, or both; (b) are 

assigned to a higher paying MS–DRG 

when present as a secondary diagnosis 

(that is, conditions under the MS–DRG 

system that are complications or 

comorbidities (CCs) or major 

complications or comorbidities (MCCs); 

and (c) could reasonably have been 

prevented through the application of 

evidence-based guidelines. Section 

1886(d)(4)(D) of the Act also specifies 

that the list of conditions may be 

revised, again in consultation with CDC, 

from time to time as long as the list 

contains at least two conditions. Section 

1886(d)(4)(D)(iii) of the Act requires that 

hospitals, effective with discharges 

occurring on or after October 1, 2007, 

submit information on Medicare claims 

specifying whether diagnoses were 

present on admission (POA). Section 

1886(d)(4)(D)(i) of the Act specifies that 

effective for discharges occurring on or 

after October 1, 2008, Medicare no 

longer assigns an inpatient hospital 

discharge to a higher paying MS–DRG if 

a selected condition is not POA. 

• Section 1886(a)(4) of the Act, which 

specifies that costs of approved 

educational activities are excluded from 

the operating costs of inpatient hospital 

services. Hospitals with approved 

graduate medical education (GME) 

programs are paid for the direct costs of 

GME in accordance with section 1886(h) 

of the Act. A payment for indirect 

medical education (IME) is made under 

section 1886(d)(5)(B) of the Act. 

• Section 1886(b)(3)(B)(viii) of the 

Act, which requires the Secretary to 

reduce the applicable percentage 

increase in payments to a subsection (d) 

hospital for a fiscal year if the hospital 

does not submit data on measures in a 

form and manner, and at a time, 

specified by the Secretary. 

• Section 1886(o) of the Act, which 

requires the Secretary to establish a 

Hospital Value-Based Purchasing (VBP) 

Program under which value-based 

incentive payments are made in a fiscal 

year to hospitals meeting performance 

standards established for a performance 

period for such fiscal year. 

• Section 1886(p) of the Act, as added 

by section 3008 of the Affordable Care 

Act, which establishes an adjustment to 

hospital payments for hospital-acquired 

conditions (HACs), or a HospitalAcquired Condition (HAC) Reduction 

Program, under which payments to 

applicable hospitals are adjusted to 

provide an incentive to reduce hospitalacquired conditions. 

• Section 1886(q) of the Act, as added 

by section 3025 of the Affordable Care 

Act and amended by section 10309 of 

the Affordable Care Act, which 

establishes the ‘‘Hospital Readmissions 

Reduction Program’’ effective for 

discharges from an ‘‘applicable 

hospital’’ beginning on or after October 

1, 2012, under which payments to those 

hospitals under section 1886(d) of the 

Act will be reduced to account for 

certain excess readmissions. 

• Section 1886(r) of the Act, as added 

by section 3133 of the Affordable Care 

Act, which provides for a reduction to 

disproportionate share hospital 

payments under section 1886(d)(5)(F) of 

the Act and for a new uncompensated 

care payment to eligible hospitals. 

Specifically, section 1886(r) of the Act 

now requires that, for fiscal year 2014 

and each subsequent fiscal year, 

subsection (d) hospitals that would 

otherwise receive a disproportionate 

share hospital payment made under 

section 1886(d)(5)(F) of the Act will 

receive two separate payments: (1) 25 

percent of the amount they previously 

would have received under section 

1886(d)(5)(F) of the Act for DSH (‘‘the 

empirically justified amount’’), and (2) 

an additional payment for the DSH 

hospital’s proportion of uncompensated 

care, determined as the product of three 

factors. These three factors are: (1) 75 

percent of the payments that would 

otherwise be made under section 

1886(d)(5)(F) of the Act; (2) 1 minus the 

percent change in the percent of 

individuals under the age of 65 who are 

uninsured (minus 0.1 percentage points 

for FY 2014, and minus 0.2 percentage 

points for FY 2015 through FY 2017); 

and (3) a hospital’s uncompensated care 

amount relative to the uncompensated 

care amount of all DSH hospitals 

expressed as a percentage. 

• Section 1886(m)(6) of the Act, as 

added by section 1206(a)(1) of the 

Pathway for SGR Reform Act of 2013 

(Pub. L. 113–67), which provided for the 

establishment of patient criteria for 

payment under the LTCH PPS for 

implementation beginning in FY 2016. 

• Section 1206(b)(1) of the Pathway 

for SGR Reform Act of 2013, which 

further amended section 114(c) of the 

MMSEA, as amended by section 4302(a) 

of the ARRA and sections 3106(c) and 

10312(a) of the Affordable Care Act, by 

retroactively reestablishing and 

extending the statutory moratorium on 

the full implementation of the 25- 

percent threshold payment adjustment 

policy under the LTCH PPS so that the 

policy will be in effect for 9 years 

(except for ‘‘grandfathered’’ hospitalwithin-hospitals (HwHs), which are 

permanently exempt from this policy); 

and section 1206(b)(2) (as amended by 

section 112(b) of Pub. L. 113–93), which 

together further amended section 114(d) 


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of the MMSEA, as amended by section 

4302(a) of the ARRA and sections 

3106(c) and 10312(a) of the Affordable 

Care Act to establish a new moratoria 

(subject to certain defined exceptions) 

on the development of new LTCHs and 

LTCH satellite facilities and a new 

moratorium on increases in the number 

of beds in existing LTCHs and LTCH 

satellite facilities beginning January 1, 

2015 and ending on September 30, 

2017; and section 1206(d), which 

instructs the Secretary to evaluate 

payments to LTCHs classified under 

section 1886(b)(1)(C)(iv)(II) of the Act 

and to adjust payment rates in FY 2015 

or FY 2016 under the LTCH PPS, as 

appropriate, based upon the evaluation 

findings. 

• Section 1886(m)(5)(D)(iv) of the 

Act, as added by section 1206 (c) of the 

Pathway for SGR Reform Act of 2013, 

which provides for the establishment, 

no later than October 1, 2015, of a 

functional status quality measure under 

the LTCH QRP for change in mobility 

among inpatients requiring ventilator 

support. 

• Section 1899B of the Act, as added 

by the Improving Medicare Post-Acute 

Care Transformation Act of 2014 (the 

IMPACT Act of 2014), which imposes 

new data reporting requirements for 

certain postacute care providers, 

including LTCHs. 

2. Summary of the Major Provisions 

a. MS–DRG Documentation and Coding 

Adjustment 

Section 631 of the American Taxpayer 

Relief Act (ATRA, Pub. L. 112–240) 

amended section 7(b)(1)(B) of Public 

Law 110–90 to require the Secretary to 

make a recoupment adjustment to the 

standardized amount of Medicare 

payments to acute care hospitals to 

account for changes in MS–DRG 

documentation and coding that do not 

reflect real changes in case-mix, totaling 

$11 billion over a 4-year period of FYs 

2014, 2015, 2016, and 2017. This 

adjustment represents the amount of the 

increase in aggregate payments as a 

result of not completing the prospective 

adjustment authorized under section 

7(b)(1)(A) of Public Law 110–90 until 

FY 2013. Prior to the ATRA, this 

amount could not have been recovered 

under Public Law 110–90. 

While our actuaries estimated that a 

¥9.3 percent adjustment to the 

standardized amount would be 

necessary if CMS were to fully recover 

the $11 billion recoupment required by 

section 631 of the ATRA in one year, it 

is often our practice to delay or phase 

in rate adjustments over more than one 

year, in order to moderate the effects on 

rates in any one year. Therefore, 

consistent with the policies that we 

have adopted in many similar cases, we 

made a ¥0.8 percent recoupment 

adjustment to the standardized amount 

in FY 2014 and FY 2015. We are 

proposing to make an additional ¥0.8 

percent recoupment adjustment to the 

standardized amount in FY 2016. 

b. Reduction of Hospital Payments for 

Excess Readmissions 

We are proposing changes in policies 

to the Hospital Readmissions Reduction 

Program, which is established under 

section 1886(q) of the Act, as added by 

section 3025 of the Affordable Care Act. 

The Hospital Readmissions Reduction 

Program requires a reduction to a 

hospital’s base operating DRG payment 

to account for excess readmissions of 

selected applicable conditions. For FYs 

2013 and 2014, these conditions are 

acute myocardial infarction, heart 

failure, and pneumonia. For FY 2014, 

we established additional exclusions to 

the three existing readmission measures 

(that is, the excess readmission ratio) to 

account for additional planned 

readmissions. We also established 

additional readmissions measures, 

chronic obstructive pulmonary disease 

(COPD), and total hip arthroplasty and 

total knee arthroplasty (THA/TKA), to 

be used in the Hospital Readmissions 

Reduction Program for FY 2015 and 

future years. We expanded the 

readmissions measures for FY 2017 and 

future years by adding a measure of 

patients readmitted following coronary 

artery bypass graft (CABG) surgery. 

In this proposed rule, we are 

proposing a refinement to the 

pneumonia readmissions measure, 

which would expand the measure 

cohort for the FY 2017 payment 

determination and subsequent years. In 

addition, we are proposing to adopt an 

extraordinary circumstance exception 

policy that would align with existing 

extraordinary circumstance exception 

policies for other IPPS quality reporting 

and payment programs and would allow 

hospitals that experience an 

extraordinary circumstance (such as a 

hurricane or flood) to request a waiver 

for use of data from the affected time 

period. 

c. Hospital Value-Based Purchasing 

(VBP) Program 

Section 1886(o) of the Act requires the 

Secretary to establish a Hospital VBP 

Program under which value-based 

incentive payments are made in a fiscal 

year to hospitals based on their 

performance on measures established 

for a performance period for such fiscal 

year. 

For FY 2016, we are proposing to 

adopt one additional measure beginning 

with the FY 2018 program year and one 

measure beginning with the FY 2021 

program year. We also are proposing to 

remove two measures beginning with 

the FY 2018 program year. In addition, 

we are proposing to move one measure 

to the Safety domain and to remove the 

Clinical Care—Process subdomain and 

rename the Clinical Care—Outcomes 

subdomain as the Clinical Care domain. 

Finally, we are signaling our intent to 

propose in future rulemaking to expand 

one measure and to update the standard 

population data we use to calculate 

several measures beginning with the FY 

2019 program year. 

d. Hospital-Acquired Condition (HAC) 

Reduction Program 

Section 1886(p) of the Act, as added 

under section 3008(a) of the Affordable 

Care Act, establishes an incentive to 

hospitals to reduce the incidence of 

hospital-acquired conditions by 

requiring the Secretary to make an 

adjustment to payments to applicable 

hospitals effective for discharges 

beginning on October 1, 2014 and for 

subsequent program years. This 1- 

percent payment reduction applies to a 

hospital whose ranking is in the top 

quartile (25 percent) of all applicable 

hospitals, relative to the national 

average, of conditions acquired during 

the applicable period and on all of the 

hospital’s discharges for the specified 

fiscal year. The amount of payment 

shall be equal to 99 percent of the 

amount of payment that would 

otherwise apply to such discharges 

under section 1886(d) or 1814(b)(3) of 

the Act, as applicable. 

In this proposed rule, we are 

proposing three changes to existing 

Hospital-Acquired Condition Reduction 

Program policies: (1) An expansion to 

the population covered by the central 

line-associated bloodstream infection 

(CLABSI) and catheter-associated 

urinary tract infection (CAUTI) 

measures to include patients in select 

nonintensive care unit sites within a 

hospital; (2) an adjustment to the 

relative contribution of each domain to 

the Total HAC Score which is used to 

determine if a hospital will receive the 

payment adjustment; and (3) a policy 

that would align with existing 

extraordinary circumstance exception 

policies for other IPPS quality reporting 

and payment programs and would allow 

hospitals to request a waiver for use of 

data from the affected time period. 


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e. DSH Payment Adjustment and 

Additional Payment for Uncompensated 

Care 

Section 3133 of the Affordable Care 

Act modified the Medicare 

disproportionate share hospital (DSH) 

payment methodology beginning in FY 

2014. Under section 1886(r) of the Act, 

which was added by section 3133 of the 

Affordable Care Act, starting in FY 

2014, DSHs will receive 25 percent of 

the amount they previously would have 

received under the current statutory 

formula for Medicare DSH payments in 

section 1886(d)(5)(F) of the Act. The 

remaining amount, equal to 75 percent 

of what otherwise would have been paid 

as Medicare DSH payments, will be paid 

as additional payments after the amount 

is reduced for changes in the percentage 

of individuals that are uninsured. Each 

Medicare DSH hospital will receive an 

additional payment based on its share of 

the total amount of uncompensated care 

for all Medicare DSH hospitals for a 

given time period. 

In this proposed rule, we are 

proposing to update our estimates of the 

three factors used to determine 

uncompensated care payments for FY 

2016. We are proposing to continue to 

use the methodology we established in 

FY 2015 to calculate the uncompensated 

care payment amounts for merged 

hospitals such that we combine 

uncompensated care data for the 

hospitals that have undergone a merger 

in order to calculate their relative share 

of uncompensated care. We also are 

proposing a change to the time period 

of the data used to calculate the 

uncompensated care payment amounts 

to be distributed. 

f. Proposed Changes to the LTCH PPS 

Under the current LTCH PPS, all 

discharges are paid under the LTCH PPS 

standard Federal payment rate. In this 

proposed rule, we are proposing to 

implement section 1206 of the Pathways 

for SGR Reform Act, which requires the 

establishment of an alternative site 

neutral payment rate for Medicare 

inpatient discharges from an LTCH that 

fail to meet certain statutory defined 

criteria, beginning with LTCH 

discharges occurring in cost reporting 

periods beginning on or after October 1, 

2015. We include proposals regarding 

the application of the site neutral 

payment rate and the criteria for 

exclusion from the site neutral payment 

rate, as well as proposals on a number 

of methodological and implementation 

issues, such as the criterion for a 

principal diagnosis relating to a 

psychiatric diagnosis or to 

rehabilitation, the intensive care unit 

(ICU) criterion, the ventilator criterion, 

the definition of ‘‘immediately 

preceded’’ by a subsection (d) hospital 

discharge, limitation on beneficiary 

charges in the context of the new site 

neutral payment rate, and the 

transitional blended payment rate 

methodology for FY 2016 and FY 2017. 

In addition, we are proposing changes 

to address certain statutory 

requirements related to an LTCH’s 

average length of stay criterion and 

discharge payment percentage. We also 

are providing technical clarifications 

relating to our FY 2015 implementation 

of the new statutory moratoria on the 

establishment of new LTCHs and LTCH 

satellite facilities (subject to certain 

defined exceptions) and on bed 

increases in existing LTCHs and LTCH 

satellite facilities as well as proposing a 

technical revision to the regulations to 

more clearly reflect our established 

policies. 

g. Hospital Inpatient Quality Reporting 

(IQR) Program 

Under section 1886(b)(3)(B)(viii) of 

the Act, hospitals are required to report 

data on measures selected by the 

Secretary for the Hospital IQR Program 

in order to receive the full annual 

percentage increase in payments. In past 

years, we have established measures for 

reporting data and the process for 

submittal and validation of the data. 

In this proposed rule, we are 

proposing to update considerations for 

measure removal and retention. In 

addition, we are proposing to remove 

nine measures for the FY 2018 payment 

determination and subsequent years: Six 

of these measures are ‘‘topped-out’’ and 

two of the measures are suspended. 

However, we are retaining the electronic 

version of six of these measures. We 

also are proposing to refine two 

previously adopted measures as well as 

for the FY 2018 payment determination 

and subsequent years and add eight new 

measures: Seven new claims-based 

measures and one structural measure. 

Further, for the FY 2018 payment 

determination, we are proposing to 

require hospitals to report 16 of the 28 

electronic clinical quality measures 

under the Hospital IQR Program that 

align with the Medicare EHR Incentive 

Program and span 3 different NQS 

domains. We also are proposing to 

require that hospitals submit two 

quarters (Q3 and Q4) of data within 2 

months following the last discharge date 

of the quarter. We are proposing to 

delay and footnote public reporting of 

electronic clinical quality measure data 

submitted by hospitals for the CY 2016/ 

FY 2018 payment determination. 

We are proposing to align the 

reporting and submission timelines for 

the electronic submission of clinical 

quality measures for the Medicare EHR 

Incentive Program for eligible hospitals 

and critical access hospitals (CAHs) 

with the reporting and submission 

timelines for the Hospital IQR Program. 

Lastly, ONC is proposing a 2015 Edition 

certification criterion for ‘‘CQMs— 

report’’ as part of the proposed 2015 

Edition of certification criteria that 

would require a certified Health IT 

Module to enable a user to 

electronically create a data file for 

transmission of clinical quality 

measurement data. This proposed 

certification criterion would apply to 

eligible professionals, eligible hospitals, 

and CAHs. 

h. Long-Term Care Quality Reporting 

Program (LTCH QRP) 

Section 3004(a) of the Affordable Care 

Act amended section 1886(m)(5) of the 

Act to require the Secretary to establish 

the Long-Term Care Hospital Quality 

Reporting Program (LTCH QRP). This 

program applies to all hospitals certified 

by Medicare as LTCHs. Beginning with 

the FY 2014 payment determination and 

subsequent years, the Secretary is 

required to reduce any annual update to 

the standard Federal rate for discharges 

occurring during such fiscal year by 2 

percentage points for any LTCH that 

does not comply with the requirements 

established by the Secretary. 

The IMPACT Act of 2014 amended 

the Act in ways that affect the LTCH 

QRP. Specifically, section 2(a) of the 

IMPACT Act of 2014 added section 

1899B of the Act, and section 2(c)(3) of 

the IMPACT Act of 2014 amended 

section 1886(m)(5) of the Act. Under 

section 1899B(a)(1) of the Act, the 

Secretary must require post-acute care 

(PAC) providers (defined in section 

1899B(a)(2)(A) of the Act to include 

HHAs, SNFs, IRFs, and LTCHs) to 

submit standardized patient assessment 

data in accordance with section 

1899B(b) of the Act, data on quality 

measures required under section 

1899B(c)(1) of the Act, and data on 

resource use and other measures 

required under section 1899B(d)(1) of 

the Act. The Act also sets out specified 

application dates for each of the 

measures. The Secretary must specify 

the quality, resource use, and other 

measures not later than the applicable 

specified application date defined in 

section 1899B(a)(2)(E) of the Act. 

In this proposed rule, we are 

proposing three previously finalized 

quality measures: One measure proposal 

establishes the newly NQF-endorsed 

status of that quality measure; two other 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24335 

measure proposals are for the purpose of 

establishing the cross-setting use of the 

previously finalized quality measures, 

in order to satisfy the IMPACT Act of 

2014 requirement of adopting quality 

measures under the domains of skin 

integrity and falls with major injury. We 

are proposing to adopt an ‘‘application 

of’’ a fourth previously finalized LTCH 

functional status measure in order to 

meet the requirement of the IMPACT 

Act of 2014 to adopt a cross-setting 

measure under the domain of functional 

status, such as self-care or mobility. All 

four measure proposals effect the FY 

2018 annual payment update 

determination and beyond. 

In addition, we are proposing to 

publicly report LTCH quality data 

beginning in fall 2016, on a CMS Web 

site, such as Hospital Compare. We are 

proposing to initially publicly report 

quality data on four quality measures. 

Finally, we are proposing to lengthen 

our quarterly data submission deadlines 

from 45 days to 135 days beyond the 

end of each calendar year quarter 

beginning with quarter four (4) 2015 

quality data. We are proposing this 

change in order to align with other 

quality reporting programs, and to allow 

an appropriate amount of time for 

LTCHs to review and correct quality 

data prior to the public posting of that 

data. 

3. Summary of Costs and Benefits 

• Adjustment for MS–DRG 

Documentation and Coding Changes. 

We are proposing to make a ¥0.8 

percent recoupment adjustment to the 

standardized amount for FY 2016 to 

implement, in part, the requirement of 

section 631 of the ATRA that the 

Secretary make an adjustment totaling 

$11 billion over a 4-year period of FYs 

2014, 2015, 2016, and 2017. This 

proposed recoupment adjustment 

represents the amount of the increase in 

aggregate payments as a result of not 

completing the prospective adjustment 

authorized under section 7(b)(1)(A) of 

Public Law 110–90 until FY 2013. Prior 

to the ATRA, this amount could not 

have been recovered under Public Law 

110–90. 

While our actuaries estimated that a 

¥9.3 percent recoupment adjustment to 

the standardized amount would be 

necessary if CMS were to fully recover 

the $11 billion recoupment required by 

section 631 of the ATRA in FY 2014, it 

is often our practice to delay or phase 

in rate adjustments over more than one 

year, in order to moderate the effects on 

rates in any one year. Therefore, 

consistent with the policies that we 

have adopted in many similar cases and 

the adjustment we made for FY 2014, 

we are proposing to make a ¥0.8 

percent recoupment adjustment to the 

standardized amount in FY 2016. 

Considering the ¥0.8 percent 

adjustments made in FY 2014 and FY 

2015, we estimate that the combined 

impact of the proposed adjustment for 

FY 2016 and leaving the FY 2014 and 

FY 2015 adjustments in place would be 

to recover up to $3 billion in FY 2016. 

Combined with the effects of the ¥0.8 

percent adjustments implemented in FY 

2014 and FY 2015, we estimate that the 

proposed FY 2016 ¥0.8 percent 

adjustment would result in the recovery 

of a total of approximately $6 billion of 

the $11 billion in overpayments 

required to be recovered by section 631 

of the ATRA. 

• Proposed Changes to the Hospital 

Readmissions Reduction Program. We 

are proposing a refinement to the 

pneumonia readmissions measure, 

which would expand the measure 

cohort for the FY 2017 payment 

determination and subsequent years. In 

addition, we are proposing to adopt an 

extraordinary circumstance exception 

policy that would align with existing 

extraordinary circumstance exception 

policies for other IPPS quality reporting 

and payment programs and would allow 

hospitals that experience an 

extraordinary circumstance (such as a 

hurricane or flood) to request a waiver 

for use of data from the affected time 

period. These proposed changes would 

not significantly impact the program in 

FY 2016, but could impact future years, 

depending on actual experience. 

• Value-Based Incentive Payments 

under the Hospital VBP Program. We 

estimate that there would be no net 

financial impact to the Hospital VBP 

Program for the FY 2016 program year 

in the aggregate because, by law, the 

amount available for value-based 

incentive payments under the program 

in a given year must be equal to the total 

amount of base operating MS–DRG 

payment amount reductions for that 

year, as estimated by the Secretary. The 

estimated amount of base operating MS– 

DRG payment amount reductions for the 

FY 2016 program year and, therefore, 

the estimated amount available for 

value-based incentive payments for FY 

2016 discharges is approximately $1.5 

billion. We believe that the program 

benefits will be seen in improved 

patient outcomes, safety, and in the 

patient’s experience of care. However, 

we cannot estimate these benefits in 

actual dollar and patient terms. 

• Proposed Changes to the HAC 

Reduction Program for FY 2016. We are 

proposing three changes to existing 

HAC Reduction Program policies: (1) An 

expansion to the population covered by 

the central line-associated bloodstream 

infection (CLABSI) and catheterassociated urinary tract infection 

(CAUTI) measures to include patients in 

select nonintensive care unit sites 

within a hospital; (2) an adjustment to 

the relative contribution of each domain 

to the Total HAC Score that is used to 

determine if a hospital will receive the 

payment adjustment; and (3) a policy 

that would align with existing 

extraordinary circumstance exception 

policies for other IPPS quality reporting 

and payment programs and would allow 

hospitals to request a waiver for use of 

data from the affected period. While 

hospitals in the top quartile of HAC 

scores will continue to have their HAC 

Reduction Program payment adjustment 

applied, as required by law, because a 

hospital’s Total HAC score and its 

ranking in comparison to other hospitals 

in any given year depend on several 

different factors, any significant impact 

due to the proposed changes, including 

which hospitals receive the adjustment, 

would depend on actual experience. 

• Medicare DSH Payment Adjustment 

and Additional Payment for 

Uncompensated Care. Under section 

1886(r) of the Act (as added by section 

3313 of the Affordable Care Act), 

disproportionate share hospital 

payments to hospitals under section 

1886(d)(5)(F) of the Act are reduced and 

an additional payment for 

uncompensated care is made to eligible 

hospitals beginning in FY 2014. 

Hospitals that receive Medicare DSH 

payments will receive 25 percent of the 

amount they previously would have 

received under the current statutory 

formula for Medicare DSH payments in 

section 1886(d)(5)(F) of the Act. The 

remainder, equal to an estimate of 75 

percent of what otherwise would have 

been paid as Medicare DSH payments, 

will be the basis for determining the 

additional payments for uncompensated 

care after the amount is reduced for 

changes in the percentage of individuals 

that are uninsured and additional 

statutory adjustments. Each hospital 

that receives Medicare DSH payments 

will receive an additional payment for 

uncompensated care based on its share 

of the total uncompensated care amount 

reported by Medicare DSHs. The 

reduction to Medicare DSH payments is 

not budget neutral. 

For FY 2016, we are proposing to 

provide that the 75 percent of what 

otherwise would have been paid for 

Medicare DSH is adjusted to 

approximately 63.69 percent of the 

amount to reflect changes in the 

percentage of individuals that are 

uninsured and additional statutory 

adjustments. In other words, 


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approximately 47.76 percent (the 

product of 75 percent and 63.69 

percent) of our estimate of Medicare 

DSH payments prior to the application 

of section 3133 of the Affordable Care 

Act is available to make additional 

payment to hospitals for their relative 

share of the total amount of 

uncompensated care. We project that 

Medicare DSH payments and additional 

payments for uncompensated care made 

for FY 2016 would reduce payments 

overall by approximately 1 percent as 

compared to the Medicare DSH 

payments and uncompensated care 

payments distributed in FY 2015. The 

additional payments have redistributive 

effects based on a hospital’s 

uncompensated care amount relative to 

the uncompensated care amount for all 

hospitals that are estimated to receive 

Medicare DSH payments, and the 

proposed payment amount is not 

directly tied to a hospital’s number of 

discharges. 

• Proposed Update to the LTCH PPS 

Payment Rates and Other Payment 

Factors. Based on the best available data 

for the 418 LTCHs in our data base, we 

estimate that the proposed changes to 

the payment rates and factors that we 

are presenting in the preamble and 

Addendum of this proposed rule, 

including the proposed application of 

the new site neutral payment rate 

required by section 1886(m)(6)(A) of the 

Act, the proposed update to the LTCH 

PPS standard Federal rate for FY 2016, 

and the proposed changes to short-stay 

outlier and high-cost outlier payments 

would result in an estimated decrease in 

payments from FY 2015 of 

approximately $251 million (or 4.6 

percent). 

• Hospital Inpatient Quality 

Reporting (IQR) Program. In this 

proposed rule, we are proposing to 

remove nine measures for the FY 2018 

payment determination and subsequent 

years. We are proposing to add eight 

measures to the hospital IQR Program 

for the FY 2018 payment determination 

and subsequent years. We also are 

proposing to require hospitals to report 

16 of the 28 Hospital IQR Program 

electronic clinical quality measures that 

align with the Medicare EHR Incentive 

Program and span three different NQS 

domains. We estimate that our 

proposals for the adoption and removal 

of measures will result in total hospital 

costs of $169 million across 3,300 IPPS 

hospitals. 

• Changes in LTCH Payments Related 

to the LTCH QRP Proposals. We believe 

that the increase in costs to LTCHs 

related to our LTCH QRP proposals in 

this proposed rule is zero. We refer 

readers to sections VIII.C. of the 

preamble of this proposed rule for 

detailed discussion of the proposals. 

B. Summary 

1. Acute Care Hospital Inpatient 

Prospective Payment System (IPPS) 

Section 1886(d) of the Social Security 

Act (the Act) sets forth a system of 

payment for the operating costs of acute 

care hospital inpatient stays under 

Medicare Part A (Hospital Insurance) 

based on prospectively set rates. Section 

1886(g) of the Act requires the Secretary 

to use a prospective payment system 

(PPS) to pay for the capital-related costs 

of inpatient hospital services for these 

‘‘subsection (d) hospitals.’’ Under these 

PPSs, Medicare payment for hospital 

inpatient operating and capital-related 

costs is made at predetermined, specific 

rates for each hospital discharge. 

Discharges are classified according to a 

list of diagnosis-related groups (DRGs). 

The base payment rate is comprised of 

a standardized amount that is divided 

into a labor-related share and a 

nonlabor-related share. The laborrelated share is adjusted by the wage 

index applicable to the area where the 

hospital is located. If the hospital is 

located in Alaska or Hawaii, the 

nonlabor-related share is adjusted by a 

cost-of-living adjustment factor. This 

base payment rate is multiplied by the 

DRG relative weight. 

If the hospital treats a high percentage 

of certain low-income patients, it 

receives a percentage add-on payment 

applied to the DRG-adjusted base 

payment rate. This add-on payment, 

known as the disproportionate share 

hospital (DSH) adjustment, provides for 

a percentage increase in Medicare 

payments to hospitals that qualify under 

either of two statutory formulas 

designed to identify hospitals that serve 

a disproportionate share of low-income 

patients. For qualifying hospitals, the 

amount of this adjustment varies based 

on the outcome of the statutory 

calculations. The Affordable Care Act 

revised the Medicare DSH payment 

methodology and provides for a new 

additional Medicare payment that 

considers the amount of uncompensated 

care beginning on October 1, 2013. 

If the hospital is an approved teaching 

hospital, it receives a percentage add-on 

payment for each case paid under the 

IPPS, known as the indirect medical 

education (IME) adjustment. This 

percentage varies, depending on the 

ratio of residents to beds. 

Additional payments may be made for 

cases that involve new technologies or 

medical services that have been 

approved for special add-on payments. 

To qualify, a new technology or medical 

service must demonstrate that it is a 

substantial clinical improvement over 

technologies or services otherwise 

available, and that, absent an add-on 

payment, it would be inadequately paid 

under the regular DRG payment. 

The costs incurred by the hospital for 

a case are evaluated to determine 

whether the hospital is eligible for an 

additional payment as an outlier case. 

This additional payment is designed to 

protect the hospital from large financial 

losses due to unusually expensive cases. 

Any eligible outlier payment is added to 

the DRG-adjusted base payment rate, 

plus any DSH, IME, and new technology 

or medical service add-on adjustments. 

Although payments to most hospitals 

under the IPPS are made on the basis of 

the standardized amounts, some 

categories of hospitals are paid in whole 

or in part based on their hospitalspecific rate, which is determined from 

their costs in a base year. For example, 

sole community hospitals (SCHs) 

receive the higher of a hospital-specific 

rate based on their costs in a base year 

(the highest of FY 1982, FY 1987, FY 

1996, or FY 2006) or the IPPS Federal 

rate based on the standardized amount. 

(We note that the statutory provision for 

Medicare payments to MDHs expired on 

March 31, 2015, under current law.) 

SCHs are the sole source of care in their 

areas. Specifically, section 

1886(d)(5)(D)(iii) of the Act defines an 

SCH as a hospital that is located more 

than 35 road miles from another 

hospital or that, by reason of factors 

such as isolated location, weather 

conditions, travel conditions, or absence 

of other like hospitals (as determined by 

the Secretary), is the sole source of 

hospital inpatient services reasonably 

available to Medicare beneficiaries. In 

addition, certain rural hospitals 

previously designated by the Secretary 

as essential access community hospitals 

are considered SCHs. 

Section 1886(g) of the Act requires the 

Secretary to pay for the capital-related 

costs of inpatient hospital services ‘‘in 

accordance with a prospective payment 

system established by the Secretary.’’ 

The basic methodology for determining 

capital prospective payments is set forth 

in our regulations at 42 CFR 412.308 

and 412.312. Under the capital IPPS, 

payments are adjusted by the same DRG 

for the case as they are under the 

operating IPPS. Capital IPPS payments 

are also adjusted for IME and DSH, 

similar to the adjustments made under 

the operating IPPS. In addition, 

hospitals may receive outlier payments 

for those cases that have unusually high 

costs. 

The existing regulations governing 

payments to hospitals under the IPPS 


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are located in 42 CFR part 412, subparts 

A through M. 

2. Hospitals and Hospital Units 

Excluded From the IPPS 

Under section 1886(d)(1)(B) of the 

Act, as amended, certain hospitals and 

hospital units are excluded from the 

IPPS. These hospitals and units are: 

Rehabilitation hospitals and units; longterm care hospitals (LTCHs); psychiatric 

hospitals and units; children’s hospitals; 

certain cancer hospitals; and short-term 

acute care hospitals located in Guam, 

the U.S. Virgin Islands, the Northern 

Mariana Islands, and American Samoa. 

Religious nonmedical health care 

institutions (RNHCIs) are also excluded 

from the IPPS. Various sections of the 

Balanced Budget Act of 1997 (BBA, Pub. 

L. 105–33), the Medicare, Medicaid and 

SCHIP [State Children’s Health 

Insurance Program] Balanced Budget 

Refinement Act of 1999 (BBRA, Pub. L. 

106–113), and the Medicare, Medicaid, 

and SCHIP Benefits Improvement and 

Protection Act of 2000 (BIPA, Pub. L. 

106–554) provide for the 

implementation of PPSs for 

rehabilitation hospitals and units 

(referred to as inpatient rehabilitation 

facilities (IRFs)), LTCHs, and psychiatric 

hospitals and units (referred to as 

inpatient psychiatric facilities (IPFs)). 

(We note that the annual updates to the 

LTCH PPS are now included as part of 

the IPPS annual update document. 

Updates to the IRF PPS and IPF PPS are 

issued as separate documents.) 

Children’s hospitals, certain cancer 

hospitals, short-term acute care 

hospitals located in Guam, the U.S. 

Virgin Islands, the Northern Mariana 

Islands, and American Samoa, and 

RNHCIs continue to be paid solely 

under a reasonable cost-based system 

subject to a rate-of-increase ceiling on 

inpatient operating costs, as updated 

annually by the percentage increase in 

the IPPS operating market basket. 

The existing regulations governing 

payments to excluded hospitals and 

hospital units are located in 42 CFR 

parts 412 and 413. 

3. Long-Term Care Hospital Prospective 

Payment System (LTCH PPS) 

The Medicare prospective payment 

system (PPS) for LTCHs applies to 

hospitals described in section 

1886(d)(1)(B)(iv) of the Act effective for 

cost reporting periods beginning on or 

after October 1, 2002. The LTCH PPS 

was established under the authority of 

section 123 of the BBRA and section 

307(b) of the BIPA (as codified under 

section 1886(m)(1) of the Act). During 

the 5-year (optional) transition period, a 

LTCH’s payment under the PPS was 

based on an increasing proportion of the 

LTCH Federal rate with a corresponding 

decreasing proportion based on 

reasonable cost principles. Effective for 

cost reporting periods beginning on or 

after October 1, 2006, all LTCHs are 

paid 100 percent of the Federal rate. 

Section 1206(a) of Public Law 113–67 

established the site neutral payment rate 

under the LTCH PPS. Under this statute, 

based on a rolling effective date that is 

linked to the date on which a given 

LTCH’s Federal FY 2016 cost reporting 

period begins, LTCHs will be paid for 

LTCH discharges at the new site neutral 

payment rate unless the discharge meets 

the patient criteria for payment at the 

LTCH PPS standard Federal rate. The 

existing regulations governing payment 

under the LTCH PPS are located in 42 

CFR part 412, subpart O. Beginning with 

FY 2009, annual updates to the LTCH 

PPS are published in the same 

documents that update the IPPS (73 FR 

26797 through 26798). 

4. Critical Access Hospitals (CAHs) 

Under sections 1814(l), 1820, and 

1834(g) of the Act, payments made to 

critical access hospitals (CAHs) (that is, 

rural hospitals or facilities that meet 

certain statutory requirements) for 

inpatient and outpatient services are 

generally based on 101 percent of 

reasonable cost. Reasonable cost is 

determined under the provisions of 

section 1861(v)(1)(A) of the Act and 

existing regulations under 42 CFR part 

413. 

5. Payments for Graduate Medical 

Education (GME) 

Under section 1886(a)(4) of the Act, 

costs of approved educational activities 

are excluded from the operating costs of 

inpatient hospital services. Hospitals 

with approved graduate medical 

education (GME) programs are paid for 

the direct costs of GME in accordance 

with section 1886(h) of the Act. The 

amount of payment for direct GME costs 

for a cost reporting period is based on 

the hospital’s number of residents in 

that period and the hospital’s costs per 

resident in a base year. The existing 

regulations governing payments to the 

various types of hospitals are located in 

42 CFR part 413. 

C. Summary of Provisions of Recent 

Legislation Discussed in This Proposed 

Rule 

The American Taxpayer Relief Act of 

2012 (ATRA) (Pub. L. 112–240), enacted 

on January 2, 2013, made a number of 

changes that affect the IPPS. We 

announced changes related to certain 

IPPS provisions for FY 2013 in 

accordance with sections 605 and 606 of 

Public Law 112–240 in a notice that 

appeared in the Federal Register on 

March 7, 2013 (78 FR 14689). 

The Pathway for Sustainable Growth 

Rate (SGR) Reform Act of 2013 (Pub. L. 

113–67), enacted on December 26, 2013, 

also made a number of changes that 

affect the IPPS and the LTCH PPS. We 

implemented changes related to the 

low-volume hospital payment 

adjustment and MDH provisions for FY 

2014 in accordance with sections 1105 

and 1106 of Public Law 113–67 in an 

interim final rule with comment period 

that appeared in the Federal Register on 

March 18, 2014 (79 FR 15022). 

The Protecting Access to Medicare 

Act of 2014 (Pub. L. 113–93), enacted on 

April 1, 2014, also made a number of 

changes that affect the IPPS and LTCH 

PPS. 

The Improving Medicare Post-Acute 

Care Transformation Act of 2014 

(IMPACT Act of 2014) (Pub. L. 113– 

185), enacted on October 6, 2014, made 

a number of changes that affect the 

Long-Term Care Quality Reporting 

Program (LTCH QRP). 

1. American Taxpayer Relief Act of 2012 

(ATRA) (Pub. L. 112–240) 

In this proposed rule, we are 

proposing to make policy changes to 

implement section 631 of the American 

Taxpayer Relief Act of 2012, which 

amended section 7(b)(1)(B) of Public 

Law 110–90 and requires a recoupment 

adjustment to the standardized amounts 

under section 1886(d) of the Act based 

upon the Secretary’s estimates for 

discharges occurring in FY 2014 

through FY 2017 to fully offset $11 

billion (which represents the amount of 

the increase in aggregate payments from 

FYs 2008 through 2013 for which an 

adjustment was not previously applied). 

2. Pathway for Sustainable Growth Rate 

(SGR) Reform Act of 2013 (Pub. L. 113– 

67) 

In this proposed rule, we are 

proposing to make policy changes to 

implement and discuss the need for 

future policy changes to carry out 

provisions under section 1206 of the 

Pathway for SGR Reform Act of 2013. 

These include: 

• Section 1206(a), which provides for 

the establishment of patient criteria for 

exclusion from the new ‘‘site neutral’’ 

payment rate under the LTCH PPS, 

beginning in FY 2016. 

• Section 1206(a)(3), which requires 

changes to the LTCH average length of 

stay criterion. 

• Section 1206(b)(1), which further 

amended section 114(c) of the MMSEA, 

as amended by section 4302(a) of the 

ARRA and sections 3106(c) and 


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10312(a) of the Affordable Care Act by 

retroactively reestablishing, and 

extending, the statutory moratorium on 

the full implementation of the 25- 

percent threshold payment adjustment 

policy under the LTCH PPS so that the 

policy will be in effect for 9 years 

(except for grandfathered hospitalswithin-hospitals (HwHs), which it 

permanently exempted from this 

policy). 

• Section 1206(b)(2), which amended 

section 114(d) of the MMSEA, as 

amended by section 4302(a) of the 

ARRA and sections 3106(c) and 

10312(a) of the Affordable Care Act to 

establish new moratoria (subject to 

certain defined exceptions) on the 

development of new LTCHs and LTCH 

satellite facilities and a new moratorium 

on increases in the number of beds in 

existing LTCHs and LTCH satellite 

facilities. 

3. Protecting Access to Medicare Act of 

2014 (Pub. L. 113–93) 

In this proposed rule, we are 

proposing to make policy changes to 

implement, or making conforming 

changes to regulations in accordance 

with, the following provisions (or 

portions of the following provisions) of 

the Protecting Access to Medicare Act of 

2014 that are applicable to the IPPS and 

the LTCH PPS for FY 2016: 

• Section 112, which makes certain 

changes to Medicare LTCH provisions, 

including modifications to the statutory 

moratoria on the establishment of new 

LTCHs and LTCH satellite facilities. 

• Section 212, which prohibits the 

Secretary from requiring 

implementation of ICD–10 code sets 

before October 1, 2015. 

4. Improving Medicare Post-Acute Care 

Transformation Act of 2014 (IMPACT 

Act of 2014) (Pub. L. 113–185) 

In this proposed rule, we are 

proposing to implement portions of 

section 2 of the IMPACT Act of 2014, 

which, in part, requires LTCHs, among 

other postacute care providers, to report 

standardized patient assessment data, 

data on quality measures, and data on 

resource use and other measures. 

D. Summary of the Major Provisions of 

This Proposed Rule 

In this proposed rule, we set forth 

proposed changes to the Medicare IPPS 

for operating costs and for capitalrelated costs of acute care hospitals for 

FY 2016. We also set forth proposed 

changes relating to payments to certain 

hospitals that continue to be excluded 

from the IPPS and paid on a reasonable 

cost basis. In addition, in this proposed 

rule, we set forth proposed changes to 

the payment rates, factors, and other 

payment rate policies under the LTCH 

PPS for FY 2016. 

Below is a summary of the major 

changes that we are proposing to make: 

1. Proposed Changes to MS–DRG 

Classifications and Recalibrations of 

Relative Weights 

In section II. of the preamble of this 

proposed rule, we include— 

• Proposed changes to MS–DRG 

classifications based on our yearly 

review, including a discussion of the 

conversion of MS–DRGs to ICD–10 and 

the implementation of the ICD–10–CM 

and ICD–10–PCS systems. 

• Proposed application of the 

documentation and coding adjustment 

for FY 2016 resulting from 

implementation of the MS–DRG system. 

• Proposed recalibrations of the MS– 

DRG relative weights. 

• Proposed changes to hospitalacquired conditions (HACs) and a 

discussion of HACs, including 

infections, that would be subject to the 

statutorily required adjustment in MS– 

DRG payments for FY 2016. 

• A discussion of the FY 2016 status 

of new technologies approved for addon payments for FY 2015 and a 

presentation of our evaluation and 

analysis of the FY 2016 applicants for 

add-on payments for high-cost new 

medical services and technologies 

(including public input, as directed by 

Pub. L. 108–173, obtained in a town hall 

meeting). 

2. Proposed Changes to the Hospital 

Wage Index for Acute Care Hospitals 

In section III. of the preamble to this 

proposed rule, we are proposing 

revisions to the wage index for acute 

care hospitals and the annual update of 

the wage data. Specific issues addressed 

included the following: 

• The proposed FY 2016 wage index 

update using wage data from cost 

reporting periods beginning in FY 2012. 

• Calculation of the proposed 

occupational mix adjustment for FY 

2016 based on the 2013 Occupational 

Mix Survey. 

• Analysis and implementation of the 

proposed FY 2016 occupational mix 

adjustment to the wage index for acute 

care hospitals. 

• Proposed application of the rural 

floor, the proposed imputed rural floor, 

and the proposed frontier State floor. 

• Transitional wage indexes relating 

to the continued use of the revised OMB 

labor market area delineations based on 

2010 Decennial Census data. 

• Proposed revisions to the wage 

index for acute care hospitals based on 

hospital redesignations and 

reclassifications. 

• The proposed out-migration 

adjustment to the wage index for acute 

care hospitals for FY 2016 based on 

commuting patterns of hospital 

employees who reside in a county and 

work in a different area with a higher 

wage index. Beginning in FY 2016, we 

are proposing new out-migration 

adjustments based on commuting 

patterns obtained from 2010 Decennial 

Census data. 

• The timetable for reviewing and 

verifying the wage data used to compute 

the proposed FY 2016 hospital wage 

index. 

• Determination of the labor-related 

share for the proposed FY 2016 wage 

index. 

• Proposed changes to the 3-year 

average pension policy and proposed 

changes to the wage index timetable 

regarding pension cost for FY 2017 and 

subsequent years. 

• Clarification of the allocation of 

pension costs for the wage index. 

3. Other Decisions and Proposed 

Changes to the IPPS for Operating Costs 

and Indirect Medical Education (IME) 

Costs 

In section IV. of the preamble of this 

proposed rule, we discuss proposed 

changes or clarifications of a number of 

the provisions of the regulations in 42 

CFR parts 412 and 413, including the 

following: 

• Proposed changes to the inpatient 

hospital updates for FY 2016, including 

the adjustment for hospitals that are not 

meaningful EHR users under section 

1886(b)(3)(B)(ix) of the Act. 

• The proposed updated national and 

regional case-mix values and discharges 

for purposes of determining RRC status. 

• The statutorily required IME 

adjustment factor for FY 2016. 

• Proposal for determining Medicare 

DSH payments and the additional 

payments for uncompensated care for 

FY 2016. 

• Proposed changes to the measures 

and payment adjustments under the 

Hospital Readmissions Reduction 

Program. 

• Proposed changes to the 

requirements and provision of valuebased incentive payments under the 

Hospital Value-Based Purchasing 

Program. 

• Proposed requirements for payment 

adjustments to hospitals under the HAC 

Reduction Program for FY 2016. 

• Proposed elimination of the 

election by hospitals to use the 

simplified cost allocation methodology 

for Medicare cost reports. 

• Discussion of the Rural Community 

Hospital Demonstration Program and a 

proposal for making a budget neutrality 


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adjustment for the demonstration 

program. 

• Proposed changes in postacute care 

transfer policies as a result of proposed 

new MS–DRGs. 

• A statement of our intent to discuss 

issues related to short inpatient hospital 

stays, long outpatient stays with 

observation services, and the related 

¥0.2 percent IPPS payment adjustment 

in the CY 2016 hospital outpatient 

prospective payment system proposed 

rule that will be published this summer. 

4. Proposed FY 2016 Policy Governing 

the IPPS for Capital-Related Costs 

In section V. of the preamble to this 

proposed rule, we discuss the proposed 

payment policy requirements for 

capital-related costs and capital 

payments to hospitals for FY 2016. 

5. Proposed Changes to the Payment 

Rates for Certain Excluded Hospitals: 

Rate-of-Increase Percentages 

In section VI. of the preamble of this 

proposed rule, we discuss proposed 

changes to payments to certain excluded 

hospitals for FY 2016. 

6. Proposed Changes to the LTCH PPS 

In section VII. of the preamble of this 

proposed rule, we set forth— 

• Proposed changes to the LTCH PPS 

Federal payment rates, factors, and 

other payment rate policies under the 

LTCH PPS for FY 2016. 

• Proposals to implement section 

1206(a)(1) of the Pathway for SGR 

Reform Act, which established the site 

neutral payment rate as the default 

means of paying for discharges in LTCH 

cost reporting periods beginning on or 

after October 1, 2015. 

• Provisions to make technical 

clarifications regarding the moratoria on 

the establishment of new LTCHs and 

LTCH satellite facilities and on bed 

increases in existing LTCHs and LTCH 

satellite facilities that were established 

by section 1206(b)(2) of the Pathway for 

SGR Reform, as amended, as well as a 

proposal to make a technical revision to 

the regulations to more clearly reflect 

our established policies. 

• Proposal to revise the average 

length of stay criterion for LTCHs to 

implement section 1206(a)(3) of the 

Pathway for SGR Reform Act. 

7. Proposed Changes Relating to Quality 

Data Reporting for Specific Providers 

and Suppliers 

In section VIII. of the preamble of this 

proposed rule, we address— 

• Proposed requirements for the 

Hospital Inpatient Quality Reporting 

(IQR) Program as a condition for 

receiving the full applicable percentage 

increase. 

• Proposed changes to the 

requirements for the quality reporting 

program for PPS-exempt cancer 

hospitals (PCHQR Program). 

• Proposed changes to the 

requirements under the LTCH Quality 

Reporting Program (LTCH QRP). 

• Proposed changes to align the 

reporting and submission timelines for 

the electronic submission of clinical 

quality measures for the Medicare 

Electronic Health Record (EHR) 

Incentive Program for eligible hospitals 

and CAHs with the reporting and 

submission of timelines for the Hospital 

IQR Program, including a proposal to 

establish in regulations an EHR 

technology certification criterion for 

reporting clinical quality measures. 

8. Determining Prospective Payment 

Operating and Capital Rates and Rate-ofIncrease Limits for Acute Care Hospitals 

In the Addendum to this proposed 

rule, we set forth proposed changes to 

the amounts and factors for determining 

the proposed FY 2016 prospective 

payment rates for operating costs and 

capital-related costs for acute care 

hospitals. We also are proposing to 

establish the threshold amounts for 

outlier cases. In addition, we address 

the update factors for determining the 

rate-of-increase limits for cost reporting 

periods beginning in FY 2016 for certain 

hospitals excluded from the IPPS. 

9. Determining Standard Federal 

Payment Rates for LTCHs 

In the Addendum to this proposed 

rule, we set forth proposed changes to 

the amounts and factors for determining 

the proposed FY 2016 LTCH PPS 

standard Federal payment rate. We are 

proposing to establish the adjustments 

for wage levels, the labor-related share, 

the cost-of-living adjustment, and highcost outliers, including the fixed-loss 

amount, and the LTCH cost-to-charge 

ratios (CCRs) under the LTCH PPS. 

10. Impact Analysis 

In Appendix A of this proposed rule, 

we set forth an analysis of the impact 

that the proposed changes would have 

on affected acute care hospitals, LTCHs, 

and PCHs. 

11. Recommendation of Update Factors 

for Operating Cost Rates of Payment for 

Hospital Inpatient Services 

In Appendix B of this proposed rule, 

as required by sections 1886(e)(4) and 

(e)(5) of the Act, we provide our 

recommendations of the appropriate 

percentage changes for FY 2016 for the 

following: 

• A single average standardized 

amount for all areas for hospital 

inpatient services paid under the IPPS 

for operating costs of acute care 

hospitals (and hospital-specific rates 

applicable to SCHs). 

• Target rate-of-increase limits to the 

allowable operating costs of hospital 

inpatient services furnished by certain 

hospitals excluded from the IPPS. 

• The standard Federal payment rate 

for hospital inpatient services furnished 

by LTCHs. 

12. Discussion of Medicare Payment 

Advisory Commission 

Recommendations 

Under section 1805(b) of the Act, 

MedPAC is required to submit a report 

to Congress, no later than March 15 of 

each year, in which MedPAC reviews 

and makes recommendations on 

Medicare payment policies. MedPAC’s 

March 2015 recommendations 

concerning hospital inpatient payment 

policies address the update factor for 

hospital inpatient operating costs and 

capital-related costs for hospitals under 

the IPPS. We address these 

recommendations in Appendix B of the 

proposed rule. For further information 

relating specifically to the MedPAC 

March 2015 report or to obtain a copy 

of the report, contact MedPAC at (202) 

220–3700 or visit MedPAC’s Web site at: 

http://www.medpac.gov. 

II. Proposed Changes to Medicare 

Severity Diagnosis-Related Group (MS– 

DRG) Classifications and Relative 

Weights 

A. Background 

Section 1886(d) of the Act specifies 

that the Secretary shall establish a 

classification system (referred to as 

diagnosis-related groups (DRGs)) for 

inpatient discharges and adjust 

payments under the IPPS based on 

appropriate weighting factors assigned 

to each DRG. Therefore, under the IPPS, 

Medicare pays for inpatient hospital 

services on a rate per discharge basis 

that varies according to the DRG to 

which a beneficiary’s stay is assigned. 

The formula used to calculate payment 

for a specific case multiplies an 

individual hospital’s payment rate per 

case by the weight of the DRG to which 

the case is assigned. Each DRG weight 

represents the average resources 

required to care for cases in that 

particular DRG, relative to the average 

resources used to treat cases in all 

DRGs. 

Congress recognized that it would be 

necessary to recalculate the DRG 

relative weights periodically to account 

for changes in resource consumption. 

Accordingly, section 1886(d)(4)(C) of 

the Act requires that the Secretary 


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adjust the DRG classifications and 

relative weights at least annually. These 

adjustments are made to reflect changes 

in treatment patterns, technology, and 

any other factors that may change the 

relative use of hospital resources. 

B. MS–DRG Reclassifications 

For general information about the 

MS–DRG system, including yearly 

reviews and changes to the MS–DRGs, 

we refer readers to the previous 

discussions in the FY 2010 IPPS/RY 

2010 LTCH PPS final rule (74 FR 43764 

through 43766), the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50053 through 

50055), the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51485 through 51487), 

the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53273), the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50512), and the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

49871). 

C. Adoption of the MS–DRGs in FY 2008 

For information on the adoption of 

the MS–DRGs in FY 2008, we refer 

readers to the FY 2008 IPPS final rule 

with comment period (72 FR 47140 

through 47189). 

D. Proposed FY 2016 MS–DRG 

Documentation and Coding Adjustment 

1. Background on the Prospective MS– 

DRG Documentation and Coding 

Adjustments for FY 2008 and FY 2009 

Authorized by Public Law 110–90 

In the FY 2008 IPPS final rule with 

comment period (72 FR 47140 through 

47189), we adopted the MS–DRG 

patient classification system for the 

IPPS, effective October 1, 2007, to better 

recognize severity of illness in Medicare 

payment rates for acute care hospitals. 

The adoption of the MS–DRG system 

resulted in the expansion of the number 

of DRGs from 538 in FY 2007 to 745 in 

FY 2008. (Currently, for FY 2015, there 

are 775 MS–DRGs.) By increasing the 

number of MS–DRGs and more fully 

taking into account patient severity of 

illness in Medicare payment rates for 

acute care hospitals, MS–DRGs 

encourage hospitals to improve their 

documentation and coding of patient 

diagnoses. 

In the FY 2008 IPPS final rule with 

comment period (72 FR 47175 through 

47186), we indicated that the adoption 

of the MS–DRGs had the potential to 

lead to increases in aggregate payments 

without a corresponding increase in 

actual patient severity of illness due to 

the incentives for additional 

documentation and coding. In that final 

rule with comment period, we exercised 

our authority under section 

1886(d)(3)(A)(vi) of the Act, which 

authorizes us to maintain budget 

neutrality by adjusting the national 

standardized amount, to eliminate the 

estimated effect of changes in coding or 

classification that do not reflect real 

changes in case-mix. Our actuaries 

estimated that maintaining budget 

neutrality required an adjustment of 

¥4.8 percent to the national 

standardized amount. We provided for 

phasing in this ¥4.8 percent adjustment 

over 3 years. Specifically, we 

established prospective documentation 

and coding adjustments of ¥1.2 percent 

for FY 2008, ¥1.8 percent for FY 2009, 

and ¥1.8 percent for FY 2010. 

On September 29, 2007, Congress 

enacted the TMA [Transitional Medical 

Assistance], Abstinence Education, and 

QI [Qualifying Individuals] Programs 

Extension Act of 2007 (Pub. L. 110–90). 

Section 7(a) of Public Law 110–90 

reduced the documentation and coding 

adjustment made as a result of the MS– 

DRG system that we adopted in the FY 

2008 IPPS final rule with comment 

period to ¥0.6 percent for FY 2008 and 

¥0.9 percent for FY 2009, and we 

finalized the FY 2008 adjustment 

through rulemaking, effective October 1, 

2007 (72 FR 66886). 

For FY 2009, section 7(a) of Public 

Law 110–90 required a documentation 

and coding adjustment of ¥0.9 percent, 

and we finalized that adjustment 

through rulemaking effective October 1, 

2008 (73 FR 48447). The documentation 

and coding adjustments established in 

the FY 2008 IPPS final rule with 

comment period, which reflected the 

amendments made by section 7(a) of 

Public Law 110–90, are cumulative. As 

a result, the ¥0.9 percent 

documentation and coding adjustment 

for FY 2009 was in addition to the ¥0.6 

percent adjustment for FY 2008, 

yielding a combined effect of ¥1.5 

percent. 

2. Adjustment to the Average 

Standardized Amounts Required by 

Public Law 110–90 

a. Prospective Adjustment Required by 

Section 7(b)(1)(A) of Public Law 110–90 

Section 7(b)(1)(A) of Public Law 110– 

90 requires that, if the Secretary 

determines that implementation of the 

MS–DRG system resulted in changes in 

documentation and coding that did not 

reflect real changes in case-mix for 

discharges occurring during FY 2008 or 

FY 2009 that are different than the 

prospective documentation and coding 

adjustments applied under section 7(a) 

of Public Law 110–90, the Secretary 

shall make an appropriate adjustment 

under section 1886(d)(3)(A)(vi) of the 

Act. Section 1886(d)(3)(A)(vi) of the Act 

authorizes adjustments to the average 

standardized amounts for subsequent 

fiscal years in order to eliminate the 

effect of such coding or classification 

changes. These adjustments are 

intended to ensure that future annual 

aggregate IPPS payments are the same as 

the payments that otherwise would have 

been made had the prospective 

adjustments for documentation and 

coding applied in FY 2008 and FY 2009 

reflected the change that occurred in 

those years. 

b. Recoupment or Repayment 

Adjustments in FYs 2010 Through 2012 

Required by Section 7(b)(1)(B) Public 

Law 110–90 

If, based on a retroactive evaluation of 

claims data, the Secretary determines 

that implementation of the MS–DRG 

system resulted in changes in 

documentation and coding that did not 

reflect real changes in case-mix for 

discharges occurring during FY 2008 or 

FY 2009 that are different from the 

prospective documentation and coding 

adjustments applied under section 7(a) 

of Public Law 110–90, section 7(b)(1)(B) 

of Public Law 110–90 requires the 

Secretary to make an additional 

adjustment to the standardized amounts 

under section 1886(d) of the Act. This 

adjustment must offset the estimated 

increase or decrease in aggregate 

payments for FYs 2008 and 2009 

(including interest) resulting from the 

difference between the estimated actual 

documentation and coding effect and 

the documentation and coding 

adjustment applied under section 7(a) of 

Public Law 110–90. This adjustment is 

in addition to making an appropriate 

adjustment to the standardized amounts 

under section 1886(d)(3)(A)(vi) of the 

Act as required by section 7(b)(1)(A) of 

Public Law 110–90. That is, these 

adjustments are intended to recoup (or 

repay, in the case of underpayments) 

spending in excess of (or less than) 

spending that would have occurred had 

the prospective adjustments for changes 

in documentation and coding applied in 

FY 2008 and FY 2009 matched the 

changes that occurred in those years. 

Public Law 110–90 requires that the 

Secretary only make these recoupment 

or repayment adjustments for discharges 

occurring during FYs 2010, 2011, and 

2012. 

3. Retrospective Evaluation of FY 2008 

and FY 2009 Claims Data 

In order to implement the 

requirements of section 7 of Public Law 

110–90, we performed a retrospective 

evaluation of the FY 2008 data for 

claims paid through December 2008 

using the methodology first described in 


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the FY 2009 IPPS/LTCH PPS final rule 

(73 FR 43768 and 43775) and later 

discussed in the FY 2010 IPPS/RY 2010 

LTCH PPS final rule (74 FR 43768 

through 43772). We performed the same 

analysis for FY 2009 claims data using 

the same methodology as we did for FY 

2008 claims (75 FR 50057 through 

50068). The results of the analysis for 

the FY 2011 IPPS/LTCH PPS proposed 

and final rules, and subsequent 

evaluations in FY 2012, supported that 

the 5.4 percent estimate accurately 

reflected the FY 2009 increases in 

documentation and coding under the 

MS–DRG system. We were persuaded by 

both MedPAC’s analysis (as discussed 

in the FY 2011 IPPS/LTCH PPS final 

rule (75 FR 50064 through 50065)) and 

our own review of the methodologies 

recommended by various commenters 

that the methodology we employed to 

determine the required documentation 

and coding adjustments was sound. 

As in prior years, the FY 2008, FY 

2009, and FY 2010 MedPAR files are 

available to the public to allow 

independent analysis of the FY 2008 

and FY 2009 documentation and coding 

effects. Interested individuals may still 

order these files through the CMS Web 

site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-forOrder/LimitedDataSets/ by clicking on 

MedPAR Limited Data Set (LDS)- 

Hospital (National). This CMS Web page 

describes the file and provides 

directions and further detailed 

instructions for how to order. 

Persons placing an order must send 

the following: A Letter of Request, the 

LDS Data Use Agreement and Research 

Protocol (refer to the Web site for further 

instructions), the LDS Form, and a 

check (refer to the Web site for the 

required payment amount) to: 

Mailing address if using the U.S. 

Postal Service: Centers for Medicare & 

Medicaid Services, RDDC Account, 

Accounting Division, P.O. Box 7520, 

Baltimore, MD 21207–0520. 

Mailing address if using express mail: 

Centers for Medicare & Medicaid 

Services, OFM/Division of Accounting– 

RDDC, 7500 Security Boulevard, C3–07– 

11, Baltimore, MD 21244–1850. 

4. Prospective Adjustments for FY 2008 

and FY 2009 Authorized by Section 

7(b)(1)(A) of Public Law 110–90 

In the FY 2010 IPPS/RY 2010 LTCH 

PPS final rule (74 FR 43767 through 

43777), we opted to delay the 

implementation of any documentation 

and coding adjustment until a full 

analysis of case-mix changes based on 

FY 2009 claims data could be 

completed. We refer readers to the FY 

2010 IPPS/RY LTCH PPS final rule for 

a detailed description of our proposal, 

responses to comments, and finalized 

policy. After analysis of the FY 2009 

claims data for the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50057 through 

50073), we found a total prospective 

documentation and coding effect of 5.4 

percent. After accounting for the ¥0.6 

percent and the ¥0.9 percent 

documentation and coding adjustments 

in FYs 2008 and 2009, we found a 

remaining documentation and coding 

effect of 3.9 percent. As we have 

discussed, an additional cumulative 

adjustment of ¥3.9 percent would be 

necessary to meet the requirements of 

section 7(b)(1)(A) of Public Law 110–90 

to make an adjustment to the average 

standardized amounts in order to 

eliminate the full effect of the 

documentation and coding changes that 

do not reflect real changes in case-mix 

on future payments. Unlike section 

7(b)(1)(B) of Public Law 110–90, section 

7(b)(1)(A) does not specify when we 

must apply the prospective adjustment, 

but merely requires us to make an 

‘‘appropriate’’ adjustment. Therefore, as 

we stated in the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50061), we 

believed the law provided some 

discretion as to the manner in which we 

applied the prospective adjustment of 

¥3.9 percent. As we discussed 

extensively in the FY 2011 IPPS/LTCH 

PPS final rule, it has been our practice 

to moderate payment adjustments when 

necessary to mitigate the effects of 

significant downward adjustments on 

hospitals, to avoid what could be 

widespread, disruptive effects of such 

adjustments on hospitals. Therefore, we 

stated that we believed it was 

appropriate to not implement the ¥3.9 

percent prospective adjustment in FY 

2011 because we finalized a ¥2.9 

percent recoupment adjustment for that 

fiscal year. Accordingly, we did not 

propose a prospective adjustment under 

section 7(b)(1)(A) of Public Law 110–90 

for FY 2011 (75 FR 23868 through 

23870). We noted that, as a result, 

payments in FY 2011 (and in each 

future fiscal year until we implemented 

the requisite adjustment) would be 

higher than they would have been if we 

had implemented an adjustment under 

section 7(b)(1)(A) of Public Law 110–90. 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51489 and 51497), we 

indicated that, because further delay of 

this prospective adjustment would 

result in a continued accrual of 

unrecoverable overpayments, it was 

imperative that we implement a 

prospective adjustment for FY 2012, 

while recognizing CMS’ continued 

desire to mitigate the effects of any 

significant downward adjustments to 

hospitals. Therefore, we implemented a 

¥2.0 percent prospective adjustment to 

the standardized amount instead of the 

full ¥3.9 percent. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53274 through 53276), we 

completed the prospective portion of 

the adjustment required under section 

7(b)(1)(A) of Public Law 110–90 by 

finalizing a ¥1.9 percent adjustment to 

the standardized amount for FY 2013. 

We stated that this adjustment would 

remove the remaining effect of the 

documentation and coding changes that 

do not reflect real changes in case-mix 

that occurred in FY 2008 and FY 2009. 

We believed that it was imperative to 

implement the full remaining 

adjustment, as any further delay would 

result in an overstated standardized 

amount in FY 2013 and any future fiscal 

years until a full adjustment was made. 

We noted again that delaying full 

implementation of the prospective 

portion of the adjustment required 

under section 7(b)(1)(A) of Public Law 

110–90 until FY 2013 resulted in 

payments in FY 2010 through FY 2012 

being overstated. These overpayments 

could not be recovered by CMS because 

section 7(b)(1)(B) of Public Law 110–90 

limited recoupments to overpayments 

made in FY 2008 and FY 2009. 

5. Recoupment or Repayment 

Adjustment Authorized by Section 

7(b)(1)(B) of Public Law 110–90 

Section 7(b)(1)(B) of Public Law 110– 

90 requires the Secretary to make an 

adjustment to the standardized amounts 

under section 1886(d) of the Act to 

offset the estimated increase or decrease 

in aggregate payments for FY 2008 and 

FY 2009 (including interest) resulting 

from the difference between the 

estimated actual documentation and 

coding effect and the documentation 

and coding adjustments applied under 

section 7(a) of Public Law 110–90. This 

determination must be based on a 

retrospective evaluation of claims data. 

Our actuaries estimated that there was 

a 5.8 percentage point difference 

resulting in an increase in aggregate 

payments of approximately $6.9 billion. 

Therefore, as discussed in the FY 2011 

IPPS/LTCH PPS final rule (75 FR 50062 

through 50067), we determined that an 

aggregate adjustment of ¥5.8 percent in 

FYs 2011 and 2012 would be necessary 

in order to meet the requirements of 

section 7(b)(1)(B) of Public Law 110–90 

to adjust the standardized amounts for 

discharges occurring in FYs 2010, 2011, 

and/or 2012 to offset the estimated 

amount of the increase in aggregate 

payments (including interest) in FYs 

2008 and 2009. 


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It is often our practice to phase in 

payment rate adjustments over more 

than one year in order to moderate the 

effect on payment rates in any one year. 

Therefore, consistent with the policies 

that we have adopted in many similar 

cases, in the FY 2011 IPPS/LTCH PPS 

final rule, we made an adjustment to the 

standardized amount of ¥2.9 percent, 

representing approximately one-half of 

the aggregate adjustment required under 

section 7(b)(1)(B) of Public Law 110–90, 

for FY 2011. An adjustment of this 

magnitude allowed us to moderate the 

effects on hospitals in one year while 

simultaneously making it possible to 

implement the entire adjustment within 

the timeframe required under section 

7(b)(1)(B) of Public Law 110–90 (that is, 

no later than FY 2012). For FY 2012, in 

accordance with the timeframes set 

forth by section 7(b)(1)(B) of Public Law 

110–90, and consistent with the 

discussion in the FY 2011 IPPS/LTCH 

PPS final rule, we completed the 

recoupment adjustment by 

implementing the remaining ¥2.9 

percent adjustment, in addition to 

removing the effect of the ¥2.9 percent 

adjustment to the standardized amount 

finalized for FY 2011 (76 FR 51489 and 

51498). Because these adjustments, in 

effect, balanced out, there was no yearto-year change in the standardized 

amount due to this recoupment 

adjustment for FY 2012. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 

53276), we made a final +2.9 percent 

adjustment to the standardized amount, 

completing the recoupment portion of 

section 7(b)(1)(B) of Public Law 110–90. 

We note that with this positive 

adjustment, according to our estimates, 

all overpayments made in FY 2008 and 

FY 2009 have been fully recaptured 

with appropriate interest, and the 

standardized amount has been returned 

to the appropriate baseline. 

6. Proposed Recoupment or Repayment 

Adjustment Authorized by Section 631 

of the American Taxpayer Relief Act of 

2012 (ATRA) 

Section 631 of the ATRA amended 

section 7(b)(1)(B) of Public Law 110–90 

to require the Secretary to make a 

recoupment adjustment or adjustments 

totaling $11 billion by FY 2017. This 

adjustment represents the amount of the 

increase in aggregate payments as a 

result of not completing the prospective 

adjustment authorized under section 

7(b)(1)(A) of Public Law 110–90 until 

FY 2013. As discussed earlier, this delay 

in implementation resulted in 

overstated payment rates in FYs 2010, 

2011, and 2012. The resulting 

overpayments could not have been 

recovered under Public Law 110–90. 

Similar to the adjustments authorized 

under section 7(b)(1)(B) of Public Law 

110–90, the adjustment required under 

section 631 of the ATRA is a one-time 

recoupment of a prior overpayment, not 

a permanent reduction to payment rates. 

Therefore, any adjustment made to 

reduce payment rates in one year would 

eventually be offset by a positive 

adjustment, once the necessary amount 

of overpayment is recovered. 

As we stated in the FY 2014 IPPS/

LTCH PPS final rule (78 FR 50515 

through 50517), our actuaries estimate 

that a ¥9.3 percent adjustment to the 

standardized amount would be 

necessary if CMS were to fully recover 

the $11 billion recoupment required by 

section 631 of the ATRA in FY 2014. It 

is often our practice to phase in 

payment rate adjustments over more 

than one year, in order to moderate the 

effect on payment rates in any one year. 

Therefore, consistent with the policies 

that we have adopted in many similar 

cases, and after consideration of the 

public comments we received, in the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50515 through 50517), we implemented 

a ¥0.8 percent recoupment adjustment 

to the standardized amount in FY 2014. 

We stated that if adjustments of 

approximately ¥0.8 percent are 

implemented in FYs 2014, 2015, 2016, 

and 2017, using standard inflation 

factors, we estimate that the entire $11 

billion will be accounted for by the end 

of the statutory 4-year timeline. As 

estimates of any future adjustments are 

subject to slight variations in total 

savings, we did not provide for specific 

adjustments for FYs 2015, 2016, or 2017 

at that time. We stated that we believed 

that this level of adjustment for FY 2014 

was a reasonable and fair approach that 

satisfies the requirements of the statute 

while mitigating extreme annual 

fluctuations in payment rates. 

Consistent with the approach 

discussed in the FY 2014 IPPS/LTCH 

PPS final rule for recouping the $11 

billion required by section 631 of the 

ATRA, in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 49873 through 49874), 

we implemented an additional ¥0.8 

percent recoupment adjustment to the 

standardized amount for FY 2015. We 

estimated that this level of adjustment, 

combined with leaving the ¥0.8 percent 

adjustment made for FY 2014 in place, 

will recover up to $2 billion in FY 2015. 

When combined with the approximately 

$1 billion adjustment made in FY 2014, 

we estimated that approximately $8 

billion would be left to recover under 

section 631 of the ATRA. 

Consistent with the approach 

discussed in the FY 2014 IPPS/LTCH 

PPS final rule for recouping the $11 

billion required by section 631 of the 

ATRA, in this FY 2016 IPPS/LTCH PPS 

proposed rule, we are proposing to 

implement a ¥0.8 percent recoupment 

adjustment to the standardized amount 

for FY 2016. Considering the ¥0.8 

percent adjustments made in FY 2014 

and FY 2015, we estimate that the 

combined impact of the proposed 

adjustment for FY 2016 and leaving the 

FY 2014 and FY 2015 adjustments in 

place would be to recover up to $3 

billion in FY 2016. Combined with the 

effects of the ¥0.8 percent adjustments 

implemented in FY 2014 and FY 2015, 

we estimate that the proposed FY 2016 

¥0.8 percent adjustment would result 

in the recovery of a total of 

approximately $6 billion of the $11 

billion in overpayments required to be 

recovered by section 631 of the ATRA. 

As we explained in the FY 2014 IPPS/ 

LTCH PPS final rule, estimates of any 

future adjustments are subject to slight 

variations in total savings. Therefore, we 

have not yet addressed the specific 

amount of the final adjustment required 

under section 631 of the ATRA for FY 

2017. We continue to believe that the 

proposed ¥0.8 percent adjustment for 

FY 2016 is a reasonable and fair 

approach that will help satisfy the 

requirements of the statute while 

mitigating extreme annual fluctuations 

in payment rates. In addition, we again 

note that this proposed ¥0.8 percent 

recoupment adjustment for FY 2016, the 

respective ¥0.8 percent adjustments 

made in FY 2014 and FY 2015, and any 

future adjustment made under this 

authority, will be eventually offset by an 

equivalent positive adjustment once the 

full $11 billion recoupment requirement 

has been realized. 

E. Refinement of the MS–DRG Relative 

Weight Calculation 

1. Background 

Beginning in FY 2007, we 

implemented relative weights for DRGs 

based on cost report data instead of 

charge information. We refer readers to 

the FY 2007 IPPS final rule (71 FR 

47882) for a detailed discussion of our 

final policy for calculating the costbased DRG relative weights and to the 

FY 2008 IPPS final rule with comment 

period (72 FR 47199) for information on 

how we blended relative weights based 

on the CMS DRGs and MS–DRGs. 

As we implemented cost-based 

relative weights, some public 

commenters raised concerns about 

potential bias in the weights due to 

‘‘charge compression,’’ which is the 

practice of applying a higher percentage 

charge markup over costs to lower cost 

items and services, and a lower 


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percentage charge markup over costs to 

higher cost items and services. As a 

result, the cost-based weights would 

undervalue high-cost items and 

overvalue low-cost items if a single costto-charge ratio (CCR) is applied to items 

of widely varying costs in the same cost 

center. To address this concern, in 

August 2006, we awarded a contract to 

the Research Triangle Institute, 

International (RTI) to study the effects of 

charge compression in calculating the 

relative weights and to consider 

methods to reduce the variation in the 

CCRs across services within cost 

centers. For a detailed summary of RTI’s 

findings, recommendations, and public 

comments that we received on the 

report, we refer readers to the FY 2009 

IPPS/LTCH PPS final rule (73 FR 48452 

through 48453). In addition, we refer 

readers to RTI’s July 2008 final report 

titled ‘‘Refining Cost to Charge Ratios 

for Calculating APC and MS–DRG 

Relative Payment Weights’’ (http://

www.rti.org/reports/cms/HHSM-500- 

2005-0029I/PDF/Refining_Cost_to_

Charge_Ratios_200807_Final.pdf). 

In the FY 2009 IPPS final rule (73 FR 

48458 through 48467), in response to 

the RTI’s recommendations concerning 

cost report refinements, we discussed 

our decision to pursue changes to the 

cost report to split the cost center for 

Medical Supplies Charged to Patients 

into one line for ‘‘Medical Supplies 

Charged to Patients’’ and another line 

for ‘‘Implantable Devices Charged to 

Patients.’’ We acknowledged, as RTI had 

found, that charge compression occurs 

in several cost centers that exist on the 

Medicare cost report. However, as we 

stated in the FY 2009 IPPS final rule, we 

focused on the CCR for Medical 

Supplies and Equipment because RTI 

found that the largest impact on the 

MS–DRG relative weights could result 

from correcting charge compression for 

devices and implants. In determining 

the items that should be reported in 

these respective cost centers, we 

adopted the commenters’ 

recommendations that hospitals should 

use revenue codes established by the 

AHA’s National Uniform Billing 

Committee to determine the items that 

should be reported in the ‘‘Medical 

Supplies Charged to Patients’’ and the 

‘‘Implantable Devices Charged to 

Patients’’ cost centers. Accordingly, a 

new subscripted line for ‘‘Implantable 

Devices Charged to Patients’’ was 

created in July 2009. This new 

subscripted cost center has been 

available for use for cost reporting 

periods beginning on or after May 1, 

2009. 

As we discussed in the FY 2009 IPPS 

final rule (73 FR 48458) and in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68519 through 

68527), in addition to the findings 

regarding implantable devices, RTI also 

found that the costs and charges of 

computed tomography (CT) scans, 

magnetic resonance imaging (MRI), and 

cardiac catheterization differ 

significantly from the costs and charges 

of other services included in the 

standard associated cost center. RTI also 

concluded that both the IPPS and the 

OPPS relative weights would better 

estimate the costs of those services if 

CMS were to add standard cost centers 

for CT scans, MRIs, and cardiac 

catheterization in order for hospitals to 

report separately the costs and charges 

for those services and in order for CMS 

to calculate unique CCRs to estimate the 

costs from charges on claims data. In the 

FY 2011 IPPS/LTCH PPS final rule (75 

FR 50075 through 50080), we finalized 

our proposal to create standard cost 

centers for CT scans, MRIs, and cardiac 

catheterization, and to require that 

hospitals report the costs and charges 

for these services under new cost 

centers on the revised Medicare cost 

report Form CMS–2552–10. (We refer 

readers to the FY 2011 IPPS/LTCH PPS 

final rule (75 FR 50075 through 50080) 

for a detailed discussion of the reasons 

for the creation of standard cost centers 

for CT scans, MRIs, and cardiac 

catheterization.) The new standard cost 

centers for CT scans, MRIs, and cardiac 

catheterization are effective for cost 

reporting periods beginning on or after 

May 1, 2010, on the revised cost report 

Form CMS–2552–10. 

In the FY 2009 IPPS final rule (73 FR 

48468), we stated that, due to what is 

typically a 3-year lag between the 

reporting of cost report data and the 

availability for use in ratesetting, we 

anticipated that we might be able to use 

data from the new ‘‘Implantable Devices 

Charged to Patients’’ cost center to 

develop a CCR for ‘‘Implantable Devices 

Charged to Patients’’ in the FY 2012 or 

FY 2013 IPPS rulemaking cycle. 

However, as noted in the FY 2010 IPPS/ 

RY 2010 LTCH PPS final rule (74 FR 

43782), due to delays in the issuance of 

the revised cost report Form CMS 2552– 

10, we determined that a new CCR for 

‘‘Implantable Devices Charged to 

Patients’’ might not be available before 

FY 2013. Similarly, when we finalized 

the decision in the FY 2011 IPPS/LTCH 

PPS final rule to add new cost centers 

for CT scans, MRIs, and cardiac 

catheterization, we explained that data 

from any new cost centers that may be 

created will not be available until at 

least 3 years after they are first used (75 

FR 50077). In preparation for the FY 

2012 IPPS/LTCH PPS rulemaking, we 

checked the availability of data in the 

‘‘Implantable Devices Charged to 

Patients’’ cost center on the FY 2009 

cost reports, but we did not believe that 

there was a sufficient amount of data 

from which to generate a meaningful 

analysis in this particular situation. 

Therefore, we did not propose to use 

data from the ‘‘Implantable Devices 

Charged to Patients’’ cost center to 

create a distinct CCR for ‘‘Implantable 

Devices Charged to Patients’’ for use in 

calculating the MS–DRG relative 

weights for FY 2012. We indicated that 

we would reassess the availability of 

data for the ‘‘Implantable Devices 

Charged to Patients’’ cost center for the 

FY 2013 IPPS/LTCH PPS rulemaking 

cycle and, if appropriate, we would 

propose to create a distinct CCR at that 

time. 

During the development of the FY 

2013 IPPS/LTCH PPS proposed and 

final rules, hospitals were still in the 

process of transitioning from the 

previous cost report Form CMS–2552– 

96 to the new cost report Form CMS– 

2552–10. Therefore, we were able to 

access only those cost reports in the FY 

2010 HCRIS with fiscal year begin dates 

on or after October 1, 2009, and before 

May 1, 2010; that is, those cost reports 

on Form CMS–2552–96. Data from the 

Form CMS–2552–10 cost reports were 

not available because cost reports filed 

on the Form CMS–2552–10 were not 

accessible in the HCRIS. Further 

complicating matters was that, due to 

additional unforeseen technical 

difficulties, the corresponding 

information regarding charges for 

implantable devices on hospital claims 

was not yet available to us in the 

MedPAR file. Without the breakout in 

the MedPAR file of charges associated 

with implantable devices to correspond 

to the costs of implantable devices on 

the cost report, we believed that we had 

no choice but to continue computing the 

relative weights with the current CCR 

that combines the costs and charges for 

supplies and implantable devices. We 

stated in the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53281 through 53283) 

that when we do have the necessary 

data for supplies and implantable 

devices on the claims in the MedPAR 

file to create distinct CCRs for the 

respective cost centers for supplies and 

implantable devices, we hoped that we 

would also have data for an analysis of 

creating distinct CCRs for CT scans, 

MRIs, and cardiac catheterization, 

which could then be finalized through 

rulemaking. In the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53281), we stated 

that, prior to proposing to create these 


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CCRs, we would first thoroughly 

analyze and determine the impacts of 

the data, and that distinct CCRs for 

these new cost centers would be used in 

the calculation of the relative weights 

only if they were first finalized through 

rulemaking. 

At the time of the development of the 

FY 2014 IPPS/LTCH PPS proposed rule 

(78 FR 27506 through 27507), we had a 

substantial number of hospitals 

completing all, or some, of these new 

cost centers on the FY 2011 Medicare 

cost reports, compared to prior years. 

We stated that we believed that the 

analytic findings described using the FY 

2011 cost report data and FY 2012 

claims data supported our original 

decision to break out and create new 

cost centers for implantable devices, 

MRIs, CT scans, and cardiac 

catheterization, and we saw no reason to 

further delay proposing to implement 

the CCRs of each of these cost centers. 

Therefore, beginning in FY 2014, we 

proposed a policy to calculate the MS– 

DRG relative weights using 19 CCRs, 

creating distinct CCRs from cost report 

data for implantable devices, MRIs, CT 

scans, and cardiac catheterization. 

We refer readers to the FY 2014 IPPS/ 

LTCH PPS proposed rule (78 FR 27507 

through 27509) and final rule (78 FR 

50518 through 50523) in which we 

presented data analyses using distinct 

CCRs for implantable devices, MRIs, CT 

scans, and cardiac catheterization. The 

FY 2014 IPPS/LTCH PPS final rule also 

set forth our responses to public 

comments we received on our proposal 

to implement these CCRs. As explained 

in more detail in the FY 2014 IPPS/

LTCH PPS final rule, we finalized our 

proposal to use 19 CCRs to calculate 

MS–DRG relative weights beginning in 

FY 2014—the then existing 15 cost 

centers and the 4 new CCRs for 

implantable devices, MRIs, CT scans, 

and cardiac catheterization. Therefore, 

beginning in FY 2014, we calculate the 

IPPS MS–DRG relative weights using 19 

CCRs, creating distinct CCRs for 

implantable devices, MRIs, CT scans, 

and cardiac catheterization. 

2. Discussion for FY 2016 and Request 

for Comments on Nonstandard Cost 

Center Codes 

Consistent with the policy established 

beginning for FY 2014, we calculated 

the proposed MS–DRG relative weights 

for FY 2016 using two data sources: The 

MedPAR file as the claims data source 

and the HCRIS as the cost report data 

source. We adjusted the charges from 

the claims to costs by applying the 19 

national average CCRs developed from 

the cost reports. The description of the 

calculation of the proposed 19 CCRs and 

the proposed MS–DRG relative weights 

for FY 2016 is included in section 

II.H.3. of the preamble of this proposed 

rule. 

In preparing to calculate the 19 

national average CCRs developed from 

the cost reports, we reviewed the HCRIS 

data and noticed inconsistencies in 

hospitals’ cost reporting and use of 

nonstandard cost center codes. In 

addition, we discovered that hospitals 

typically report the nonstandard codes 

with standard cost centers that are 

different from the standard cost centers 

to which CMS maps and ‘‘rolls up’’ each 

nonstandard code in compiling the 

HCRIS. We are concerned that 

inconsistencies in hospitals’ use of 

nonstandard codes, coupled with 

differences in the way hospitals and 

CMS map these nonstandard codes to 

standard lines, may have implications 

for the calculation of the 19 CCRs and 

the aspects of the IPPS that rely on the 

CCRs (for example, the calculation of 

the MS–DRG relative weights). 

The Medicare cost report Form CMS– 

2552–10, Worksheet A, includes 

preprinted cost center codes that reflect 

the standard cost center descriptions by 

category (General Service, Routine, and 

Ancillary) used in most hospitals. Each 

preprinted standard cost center is 

assigned a unique 5-digit code. The 

preprinted 5-digit codes provide 

standardized meaning for data analysis, 

and are automatically coded by CMSapproved cost report software. To 

accommodate hospitals that have 

additional cost centers that are 

sufficiently different from the 

preprinted standard cost centers, CMS 

identified additional cost centers known 

as ‘‘nonstandard’’ cost centers. Each 

nonstandard cost center must be labeled 

appropriately and reported under a 

specific standard cost center. For 

example, under the standard cost center 

‘‘Electrocardiology’’ with its 5-digit code 

of 06900, there are six nonstandard cost 

centers (for EKG and EEG, 

Electromyography, Cardiopulmonary, 

Stress Test, Cardiology, and Holter 

Monitor), each with a unique 5-digit 

code. 

The instructions for the Medicare cost 

report Form CMS–2552–10 explain the 

purpose and requirements related to the 

standard and nonstandard cost centers. 

Specifically, in CMS Pub. 15–2, Chapter 

40, Section 4013, the instructions for 

Worksheet A of Form CMS–2552–10 

state: 

‘‘Cost center coding is a methodology 

for standardizing the meaning of cost 

center labels as used by health care 

providers on the Medicare cost report. 

Form CMS–2552–10 provides for 

preprinted cost center descriptions on 

Worksheet A. In addition, a space is 

provided for a cost center code. The 

preprinted cost center labels are 

automatically coded by CMS approved 

cost reporting software. These cost 

center descriptions are hereafter referred 

to as the standard cost centers. 

Additionally, nonstandard cost center 

descriptions have been identified 

through analysis of frequently used 

labels. 

The use of this coding methodology 

allows providers to continue to use 

labels for cost centers that have meaning 

within the individual institution. The 

five digit cost center codes that are 

associated with each provider label in 

their electronic file provide 

standardized meaning for data analysis. 

You are required to compare any added 

or changed label to the descriptions 

offered on the standard or nonstandard 

cost center tables. A description of cost 

center coding and the table of cost 

center codes are in § 4095, Table 5.’’ 

Section 4095 of CMS Pub. 15–2 (pages 

40–805 and 40–806) further provides 

that: 

‘‘Both the standard and nonstandard 

cost center descriptions along with their 

cost center codes are shown on Table 5. 

. . . Cost center codes may only be used 

in designated lines in accordance with 

the classification of the cost center(s), 

i.e., lines 1 through 23 may only contain 

cost center codes within the general 

service cost center category of both 

standard and nonstandard coding. For 

example, in the general service cost 

center category for Operation of Plant 

cost, line 7 and subscripts thereof 

should only contain cost center codes of 

00700–00719 and nonstandard cost 

center codes. This logic must hold true 

for all other cost center categories, i.e., 

ancillary, inpatient routine, outpatient, 

other reimbursable, special purpose, 

and non- reimbursable cost centers.’’ 

Table 5 of Section 4095, Chapter 40, 

of CMS Pub. 15–2 (pages 40–807 

through 40–810) lists the electronic 

reporting specifications for each 

standard cost center, its 5-digit code, 

and, separately, the nonstandard cost 

center descriptions and their 5-digit 

codes. While the nonstandard codes are 

categorized by General Service Cost 

Centers, Inpatient Routine Service Cost 

Centers, and Ancillary Service Cost 

Centers, among others, Table 5 does not 

map the nonstandard cost centers and 

codes to specific standard cost centers. 

In addition, the CMS-approved cost 

reporting software does not restrict the 

use of nonstandard codes to specific 

standard cost centers. Furthermore, the 

softwares do not prevent hospitals from 

manually entering in a name for a 

nonstandard cost center code that may 


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1To view how CMS rolls up the codes to create 

the HCRIS SAS files, we refer readers to http://

www.cms.gov/Research-Statistics-Data-andSystems/Downloadable-Public-Use-Files/CostReports/Hospital-2010-form.html. On this page, 

click on ‘‘Hospital-2010–SAS.ZIP (SAS datasets and 

documentation)’’, and from the zip file, choose the 

Excel spreadsheet ‘‘2552–10 SAS FILE RECORD 

LAYOUT AND CROSSWALK TO 96.xlsx’’. The 

second tab of this spreadsheet is ‘‘NEW ROLLUPS’’, 

and shows the standard and nonstandard 5-digit 

codes (columns B and C) that CMS rolls up to each 

standard line (column G). 2 Ibid. 

be different from the name that CMS 

assigned to that nonstandard cost center 

code. For example, Table 5 specifies 

that the 5-digit code for the Ancillary 

Service nonstandard cost center 

‘‘Acupuncture’’ is 03020. When CMS 

creates the HCRIS SAS files, CMS maps 

all codes 03020 to standard line 53, 

‘‘Anesthesiology’’.1 However, a review 

of the December 31, 2014 update of the 

FY 2013 HCRIS SAS files, from which 

the proposed 19 CCRs for FY 2016 are 

calculated, reveals that, of the 3,172 

times that nonstandard code 03020 is 

reported by hospitals, it is called 

‘‘Acupuncture’’ only 122 times. Instead, 

hospitals use various names for 

nonstandard code 03020, such as 

‘‘Cardiopulmonary,’’ ‘‘Sleep Lab,’’ 

‘‘Diabetes Center,’’ or ‘‘Wound Care’’. 

As noted above, the Ancillary Service 

standard cost center for 

‘‘Anesthesiology’’, line 53 of Worksheet 

A and subsequent worksheets of the 

Medicare cost report Form CMS–2552– 

10 (and its associated nonstandard cost 

center code 03020 ‘‘Acupuncture’’) is an 

example of a cost center that is subject 

to inconsistent reporting. Our review of 

the FY 2013 HCRIS as-submitted cost 

reports from which the proposed 19 

CCRs for FY 2016 are calculated 

revealed that, regardless of the actual 

name hospitals assigned to nonstandard 

code 03020 (for example, 

‘‘Acupuncture’’ or otherwise), hospitals 

reported this code almost 100 percent of 

the time on standard line 76, ‘‘Other 

Ancillary,’’ and never on standard line 

53, ‘‘Anesthesiology.’’ Yet, as noted 

above, CMS (and previously HCFA, 

under earlier versions of the Medicare 

cost report), in creating the HCRIS 

database, has had the longstanding 

practice of mapping and rolling up all 

instances of nonstandard code 03020 to 

standard line 53, ‘‘Anesthesiology,’’ not 

to standard line 76, ‘‘Other Ancillary. 

Therefore, the version of the HCRIS SAS 

files created by CMS, which CMS uses 

for ratesetting purposes, may differ 

somewhat from the as-submitted cost 

reports of hospitals because CMS moves 

various nonstandard cost centers based 

on cost center codes, not cost center 

descriptions, from the standard cost 

centers in which hospitals report them 

and places them in different standard 

cost centers based on CMS’ roll-up 

specifications. 

We are highlighting the discrepancy 

in the reporting of nonstandard code 

03020 ‘‘Acupuncture’’ because the 

placement of nonstandard code 03020 

and its related costs and charges seem 

to have the most significant 

implications for the calculation of one 

of the 19 CCRs, the Anesthesia CCR. As 

stated in section II.H.3. of the preamble 

of this proposed rule, the proposed FY 

2016 CCR for Anesthesia is 0.108. We 

calculated this proposed CCR based on 

the December 31, 2014 update of the FY 

2013 HCRIS, with the nonstandard cost 

center codes of 03020 through 03029 

rolled up to standard line 53, 

‘‘Anesthesiology.’’ That is, under the 

CMS’ HCRIS specifications, we roll up 

the following 5-digit codes to standard 

line 53, ‘‘Anesthesiology’’: 2 standard 

codes for ‘‘Anesthesiology’’ 05300 

through 05329; and nonstandard codes 

for ‘‘Acupuncture ’’ 03020 through 

03029. For simulation purposes, we also 

created a version of the December 31, 

2014 update of the FY 2013 HCRIS 

which retains nonstandard codes 03020 

through 03029 on standard line 76, 

‘‘Other Ancillary,’’ where hospitals 

actually reported these codes on their 

as-submitted FY 2013 cost reports. 

When all reported uses of nonstandard 

codes 03020 through 03029 remain on 

standard line 76, ‘‘Other Ancillary,’’ we 

calculated that the Anesthesia CCR 

would be 0.084 (instead of 0.108 as 

proposed in section II.H.3. of the 

preamble of this proposed rule). We also 

looked at the effect on the other 18 

CCRs. In the version of HCRIS we 

created for simulation purposes, by 

keeping the nonstandard cost center 

codes in standard line 76, ‘‘Other 

Ancillary,’’ where hospitals typically 

report them, rather than remapping 

them according to CMS specifications, 

two other CCRs also are affected, 

although not quite as significantly as the 

Anesthesia CCR. Currently, as proposed 

in section II.H.3. of the preamble of this 

proposed rule, the proposed FY 2016 

Cardiology CCR is 0.119, but when all 

cardiology-related nonstandard codes 

are rolled up to standard line 76, ‘‘Other 

Ancillary’’, and not to standard line 69, 

‘‘Electrocardiology’’ as under CMS’ 

usual practice, the Cardiology CCR 

would be 0.113. In addition, as 

proposed in section II.H.3. of the 

preamble of this proposed rule, the 

proposed FY 2016 Radiology CCR is 

0.159, but when all radiology-related 

nonstandard codes are rolled up to 

standard line 76, ‘‘Other Ancillary’’, and 

not to standard lines 54 (Radiology— 

Diagnostic), 55 (Radiology— 

Therapeutic), and 56 (Radioisotope) as 

under CMS’ usual practice, the 

Radiology CCR would be 0.161. Most 

notably, the CCR that is most impacted 

is the ‘‘Other Services’’ CCR. Currently, 

as proposed in section II.H.3. of the 

preamble of this proposed rule, the 

‘‘Other Services’’ CCR is 0.367. 

However, if all nonstandard cost center 

codes would remain in line 76, ‘‘Other 

Ancillary’’ as hospitals have reported 

them in their FY 2013 as-submitted cost 

reports, instead of CMS applying its 

usual practice of rolling up these lines 

to the applicable ‘‘Electrocardiology’’ 

and ‘‘Radiology’’ standard cost centers, 

among others, the ‘‘Other Services’’ CCR 

would be 0.291. We note that we 

observed minimal or no differences in 

the remaining 15 CCRs, when their 

associated nonstandard cost centers 

were rolled up to their specific standard 

cost centers, versus being rolled up to 

the standard line 76, ‘‘Other Ancillary.’’ 

The differences in these CCRs 

computed from the HCRIS that was 

compiled by applying CMS’ current 

rollup procedures of assigning 

nonstandard codes to specific standard 

cost centers, as compared to following 

hospitals’ general practice of reporting 

nonstandard codes ‘‘en masse’’ on line 

76, ‘‘Other Ancillary,’’ have 

implications for the aspects of the IPPS 

that rely on the CCRs (for example, the 

calculation of the MS–DRG relative 

weights). Some questions that arise are 

whether CMS’ procedures for mapping 

and rolling up nonstandard cost centers 

to specific standard cost centers should 

be updated or whether hospital 

reporting practices are imprecise, or 

whether there is a combination of both. 

CMS’ rollup procedures were developed 

many years ago based on historical 

analysis of hospitals’ cost reporting 

practices and health care services 

furnished. It may be that it would be 

appropriate for CMS to reevaluate its 

rollup procedures based on hospitals’ 

more current cost reporting practices 

and contemporary health care services 

provided. However, one factor 

complicating the determination of the 

most accurate standard cost centers to 

which each respective nonstandard cost 

center should be mapped is hospitals’ 

own inconsistent reporting practices. 

For example, it may be determined that 

CMS should no longer be mapping and 

rolling up nonstandard cost center 

‘‘Acupuncture’’ and its associated 5- 

digit codes 03020 through 03029 to 

standard cost center line 53, 

‘‘Anesthesiology.’’ However, 

determining which other standard line 


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3 Ibid. 

‘‘Acupuncture’’ and its associated 5- 

digit codes 03020 through 03029 should 

be mapped is unclear, given that, as 

mentioned above, out of the 3,172 times 

that codes 03020 through 03029 were 

reported in the FY 2013 HCRIS file, 

hospitals called these codes 

‘‘Acupuncture’’ only 122 times, and 

instead called these codes a variety of 

other names (such as Cardiopulmonary, 

Sleep Lab, Wound Care, Diabetes 

Center, among others). Therefore, 

without being able to determine the true 

nature of the services that were actually 

provided, it is difficult to know which 

standard cost center to map these 

services. That is, the question arises as 

to whether the service provided was 

acupuncture because a hospital reported 

code 03020, or whether the service 

provided was cardiopulmonary, which 

was the name a hospital assigned to 

code 03020. Furthermore, if the service 

provided was in fact cardiopulmonary, 

then, as Table 5 of Section 4095 of CMS 

Pub. 15–2 indicates, the correct 

nonstandard code for cardiopulmonary 

is 03160, not 03020. A related question 

would then be, if the hospital provided 

cardiopulmonary services, which are 

clearly related to cardiology, why did 

the hospital report those costs and 

charges on line 76, ‘‘Other Ancillary,’’ 

instead of subscripting standard line 69, 

‘‘Electrocardiology,’’ and reporting the 

cardiopulmonary costs and charges 

there. 

In summary, we believe that the 

differences between the standard cost 

centers to which CMS assigns 

nonstandard codes when CMS rolls up 

cost report data to create the HCRIS SAS 

database, and the standard cost centers 

to which hospitals tend to assign and 

use nonstandard codes, coupled with 

the inconsistencies found in hospitals’ 

use and naming of the nonstandard 

codes, have implications for the aspects 

of the IPPS that rely on the CCRs. For 

example, we have explained above and 

provided examples of how the CCRs 

used to calculate the MS–DRG relative 

weights could change, based on where 

certain nonstandard codes are reported 

and rolled up in the cost reports. 

However, before considering changes to 

our longstanding practices, we are 

interested in receiving public comments 

from stakeholders as to how to improve 

the use of nonstandard cost center 

codes. One option might be for CMS to 

allow only certain nonstandard codes to 

be used with certain standard cost 

centers, meaning that CMS might 

require that the CMS-approved cost 

reporting softwares ‘‘lock in’’ those 

nonstandard codes with their assigned 

standard cost centers. For example, if a 

hospital wishes to subscript a standard 

cost center, the cost reporting software 

might allow the hospital to choose only 

from a predetermined set of 

nonstandard codes. Therefore, for 

example, if a hospital wished to report 

Cardiopulmonary costs and charges on 

its cost report, the only place that the 

hospital could do that under this 

approach would be from a drop down 

list of cardiology-related services on 

standard line 69, ‘‘Electrocardiology,’’ 

and not on another line (not even line 

76, ‘‘Other Ancillary’’). Some flexibility 

could be maintained, but within certain 

limits, in consideration of unique 

services that hospitals might provide. 

In the interim, while we seek public 

comments on this issue, we have 

proposed 19 CCRs for FY 2016 (listed in 

section II.H.3. of the preamble of this 

proposed rule) that were calculated 

from the December 31, 2014 update of 

the FY 2013 HCRIS, created in 

accordance with CMS’ current 

longstanding procedures for mapping 

and rolling up nonstandard cost center 

codes. As we did with the FY 2015 

IPPS/LTCH PPS final rule, we are 

providing the version of the HCRIS from 

which we calculated these proposed 19 

CCRs on the FY 2016 IPPS Proposed 

Rule Home Page at: http://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/

AcuteInpatientPPS/FY2016-IPPSProposed-Rule-Home-Page.html.3

F. Proposed Adjustment to MS–DRGs for 

Preventable Hospital-Acquired 

Conditions (HACs), Including Infections 

for FY 2016 

1. Background 

Section 1886(d)(4)(D) of the Act 

addresses certain hospital-acquired 

conditions (HACs), including infections. 

This provision is part of an array of 

Medicare tools that we are using to 

promote increased quality and 

efficiency of care. Under the IPPS, 

hospitals are encouraged to treat 

patients efficiently because they receive 

the same DRG payment for stays that 

vary in length and in the services 

provided, which gives hospitals an 

incentive to avoid unnecessary costs in 

the delivery of care. In some cases, 

conditions acquired in the hospital do 

not generate higher payments than the 

hospital would otherwise receive for 

cases without these conditions. To this 

extent, the IPPS encourages hospitals to 

avoid complications. 

However, the treatment of these 

conditions can generate higher Medicare 

payments in two ways. First, if a 

hospital incurs exceptionally high costs 

treating a patient, the hospital stay may 

generate an outlier payment. However, 

because the outlier payment 

methodology requires that hospitals 

experience large losses on outlier cases 

before outlier payments are made, 

hospitals have an incentive to prevent 

outliers. Second, under the MS–DRG 

system that took effect in FY 2008 and 

that has been refined through 

rulemaking in subsequent years, certain 

conditions can generate higher 

payments even if the outlier payment 

requirements are not met. Under the 

MS–DRG system, there are currently 261 

sets of MS–DRGs that are split into 2 or 

3 subgroups based on the presence or 

absence of a complication or 

comorbidity (CC) or a major 

complication or comorbidity (MCC). 

The presence of a CC or an MCC 

generally results in a higher payment. 

Section 1886(d)(4)(D) of the Act 

specifies that, by October 1, 2007, the 

Secretary was required to select, in 

consultation with the Centers for 

Disease Control and Prevention (CDC), 

at least two conditions that: (a) Are high 

cost, high volume, or both; (b) are 

assigned to a higher paying MS–DRG 

when present as a secondary diagnosis 

(that is, conditions under the MS–DRG 

system that are CCs or MCCs); and (c) 

could reasonably have been prevented 

through the application of evidencebased guidelines. Section 1886(d)(4)(D) 

of the Act also specifies that the list of 

conditions may be revised, again in 

consultation with the CDC, from time to 

time as long as the list contains at least 

two conditions. 

Effective for discharges occurring on 

or after October 1, 2008, under the 

authority of section 1886(d)(4)(D) of the 

Act, Medicare no longer assigns an 

inpatient hospital discharge to a higher 

paying MS–DRG if a selected condition 

is not present on admission (POA). 

Thus, if a selected condition that was 

not POA manifests during the hospital 

stay, it is considered a HAC and the case 

is paid as though the secondary 

diagnosis was not present. However, 

even if a HAC manifests during the 

hospital stay, if any nonselected CC or 

MCC appears on the claim, the claim 

will be paid at the higher MS–DRG rate. 

In addition, Medicare continues to 

assign a discharge to a higher paying 

MS–DRG if a selected condition is POA. 

When a HAC is not POA, payment can 

be affected in a manner shown in the 

diagram below. 


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2. HAC Selection 

Beginning in FY 2007, we have set 

forth proposals, and solicited and 

responded to public comments, to 

implement section 1886(d)(4)(D) of the 

Act through the IPPS annual rulemaking 

process. For specific policies addressed 

in each rulemaking cycle, including a 

detailed discussion of the collaborative 

interdepartmental process and public 

input regarding selected and potential 

candidate HACs, we refer readers to the 

following rules: The FY 2007 IPPS 

proposed rule (71 FR 24100) and final 

rule (71 FR 48051 through 48053); the 

FY 2008 IPPS proposed rule (72 FR 

24716 through 24726) and final rule 

with comment period (72 FR 47200 

through 47218); the FY 2009 IPPS 

proposed rule (73 FR 23547) and final 

rule (73 FR 48471); the FY 2010 IPPS/ 

RY 2010 LTCH PPS proposed rule (74 

FR 24106) and final rule (74 FR 43782); 

the FY 2011 IPPS/LTCH PPS proposed 

rule (75 FR 23880) and final rule (75 FR 

50080); the FY 2012 IPPS/LTCH PPS 

proposed rule (76 FR 25810 through 

25816) and final rule (76 FR 51504 

through 51522); the FY 2013 IPPS/LTCH 

PPS proposed rule (77 FR 27892 

through 27898) and final rule (77 FR 

53283 through 53303); the FY 2014 

IPPS/LTCH PPS proposed rule (78 FR 

27509 through 27512) and final rule (78 

FR 50523 through 50527), and the FY 

2015 IPPS/LTCH PPS proposed rule (79 

FR 28000 through 28003) and final rule 

(79 FR 49876 through 49880). A 

complete list of the 11 current categories 

of HACs is included on the CMS Web 

site at: http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

HospitalAcqCond/Hospital-Acquired_

Conditions.html. 

3. Present on Admission (POA) 

Indicator Reporting 

Collection of POA indicator data is 

necessary to identify which conditions 

were acquired during hospitalization for 

the HAC payment provision as well as 

for broader public health uses of 

Medicare data. In previous rulemaking, 

we provided both CMS and CDC Web 

site resources that are available to 

hospitals for assistance in this reporting 

effort. For detailed information 

regarding these sites and materials, 

including the application and use of 

POA indicators, we refer the reader to 

the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51506 through 51507). 

Currently, as we have discussed in the 

prior rulemaking cited under section 

II.I.2. of the preamble of this proposed 

rule, the POA indicator reporting 

requirement only applies to IPPS 

hospitals and Maryland hospitals 

because they are subject to this HAC 

provision. Non-IPPS hospitals, 

including CAHs, LTCHs, IRFs, IPFs, 

cancer hospitals, children’s hospitals, 

RNHCIs, and the Department of 

Veterans Affairs/Department of Defense 

hospitals, are exempt from POA 

reporting. 

There are currently four POA 

indicator reporting options, ‘‘Y’’, ‘‘W’’, 

‘‘N’’, and ‘‘U’’, as defined by the ICD– 

9–CM Official Guidelines for Coding 

and Reporting. We note that prior to 

January 1, 2011, we also used a POA 

indicator reporting option ‘‘1’’. 

However, beginning on or after January 

1, 2011, hospitals were required to begin 

reporting POA indicators using the 5010 

electronic transmittal standards format. 

The 5010 format removes the need to 

report a POA indicator of ‘‘1’’ for codes 

that are exempt from POA reporting. We 

issued CMS instructions on this 

reporting change as a One-Time 

Notification, Pub. No. 100–20, 

Transmittal No. 756, Change Request 

7024, effective on August 13, 2010, 

which can be located at the following 

link on the CMS Web site: http://

www.cms.gov/manuals/downloads/

Pub100_20.pdf. The current POA 

indicators and their descriptors are 

shown in the chart below: 

Indicator Descriptor 

Y .................... Indicates that the condition was present on admission. 

W ................... Affirms that the hospital has determined that, based on data and clinical judgment, it is not possible to document when the 

onset of the condition occurred. 

N ................... Indicates that the condition was not present on admission. 

U ................... Indicates that the documentation is insufficient to determine if the condition was present at the time of admission. 


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Under the HAC payment policy, we 

treat HACs coded with ‘‘Y’’ and ‘‘W’’ 

indicators as POA and allow the 

condition on its own to cause an 

increased payment at the CC and MCC 

level. We treat HACs coded with ‘‘N’’ 

and ‘‘U’’ indicators as Not Present on 

Admission (NPOA) and do not allow the 

condition on its own to cause an 

increased payment at the CC and MCC 

level. We refer readers to the following 

rules for a detailed discussion of POA 

indicator reporting: the FY 2009 IPPS 

proposed rule (73 FR 23559) and final 

rule (73 FR 48486 through 48487); the 

FY 2010 IPPS/RY 2010 LTCH PPS 

proposed rule (74 FR 24106) and final 

rule (74 FR 43784 through 43785); the 

FY 2011 IPPS/LTCH PPS proposed rule 

(75 FR 23881 through 23882) and final 

rule (75 FR 50081 through 50082); the 

FY 2012 IPPS/LTCH PPS proposed rule 

(76 FR 25812 through 25813) and final 

rule (76 FR 51506 through 51507); the 

FY 2013 IPPS/LTCH PPS proposed rule 

(77 FR 27893 through 27894) and final 

rule (77 FR 53284 through 53285); the 

FY 2014 IPPS/LTCH PPS proposed rule 

(78 FR 27510 through 27511) and final 

rule (78 FR 50524 through 50525), and 

the FY 2015 IPPS/LTCH PPS proposed 

rule (79 FR 28001 through 28002) and 

final rule (79 FR 49877 through 49878). 

In addition, as discussed previously 

in the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53324), the 5010 format 

allows the reporting and, effective 

January 1, 2011, the processing of up to 

25 diagnoses and 25 procedure codes. 

As such, it is necessary to report a valid 

POA indicator for each diagnosis code, 

including the principal diagnosis and 

all secondary diagnoses up to 25. 

4. HACs and POA Reporting in 

Preparation for Transition to ICD–10– 

CM and ICD–10–PCS 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51506 and 51507), in 

preparation for the transition to the 

ICD–10–CM and ICD–10–PCS code sets, 

we indicated that further information 

regarding the use of the POA indicator 

with the ICD–10–CM/ICD–10–PCS 

classifications as they pertain to the 

HAC policy would be discussed in 

future rulemaking. 

At the March 5, 2012 and the 

September 19, 2012 meetings of the 

ICD–9–CM Coordination and 

Maintenance Committee, an 

announcement was made with regard to 

the availability of the ICD–9–CM HAC 

list translation to ICD–10–CM and ICD– 

10–PCS code sets. Participants were 

informed that the list of the ICD–9–CM 

selected HACs had been translated into 

codes using the ICD–10–CM and ICD– 

10–PCS classification system. It was 

recommended that the public review 

this list of ICD–10–CM/ICD–10–PCS 

code translations of the selected HACs 

available on the CMS Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. We encouraged the public 

to submit comments on these 

translations through the HACs Web page 

using the CMS ICD–10–CM/PCS HAC 

Translation Feedback Mailbox that was 

set up for this purpose under the 

Related Links section titled ‘‘CMS HAC 

Feedback.’’ We also encouraged readers 

to review the educational materials and 

draft code sets available for ICD–10– 

CM/PCS on the CMS Web site at: 

http://www.cms.gov/ICD10/. Lastly, we 

provided information regarding the 

ICD–10 MS–DRG Conversion Project on 

the CMS Web site at: http://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalAcqCond/

icd10_hacs.html. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50525), we stated that the 

final HAC list translation from ICD–9– 

CM to ICD–10–CM/ICD–10–PCS would 

be subject to formal rulemaking. We 

again encouraged readers to review the 

educational materials and updated draft 

code sets available for ICD–10–CM/ICD– 

10–PCS on the CMS Web site at: 

http://www.cms.gov/ICD10/. In 

addition, we stated that the draft ICD– 

10–CM Coding Guidelines could be 

viewed on the CDC Web site at: http:// 

www.cdc.gov/nchs/icd/icd10cm.htm. 

However, prior to engaging in 

rulemaking for the FY 2015 HAC 

program, on April 1, 2014, the 

Protecting Access to Medicare Act of 

2014 (PAMA) (Pub. L. 113–93) was 

enacted, which specified that the 

Secretary may not adopt ICD–10 prior to 

October 1, 2015. Accordingly, the U.S. 

Department of Health and Human 

Services released a final rule in the 

Federal Register on August 4, 2014 (79 

FR 45128 through 45134) that included 

a new compliance date that requires the 

use of ICD–10 beginning October 1, 

2015. The August 4, 2014 final rule is 

available for viewing on the Internet at: 

http://www.gpo.gov/fdsys/pkg/FR-2014- 

08-04/pdf/2014-18347.pdf. That final 

rule also requires HIPAA covered 

entities to continue to use ICD–9–CM 

through September 30, 2015. Further 

information of the ICD–10 rules can be 

found on the Web site at: http://

www.cms.gov/Medicare/Coding/ICD10/

Statute_Regulations.html. 

As described in section II.F.5. of the 

preamble of this proposed rule, we are 

proposing the HAC list translation from 

ICD–9–CM to ICD–10–CM/ICD–10–PCS 

in this FY 2016 IPPS/LTCH PPS 

proposed rule. 

5. Proposed Changes to the HAC 

Program for FY 2016 

As discussed in section II.G. 1. a. of 

the preamble of this proposed rule, for 

FY 2016, we are proposing the ICD–10 

MS–DRGs Version 33 as the 

replacement logic for the ICD–9–CM 

MS–DRGs Version 32. As part of our 

DRA HAC update for FY 2016, we are 

proposing that the ICD–10–CM/PCS 

Version 33 HAC list replace the ICD–9– 

CM Version 32 HAC list. We are 

soliciting public comments on how well 

the ICD–10–CM/PCS Version 32 HAC 

list replicates the ICD–9–CM Version 32 

HAC list. 

CMS prepared the ICD–10 MS–DRGs 

Version 32 based on the FY 2015 MS– 

DRGs (Version 32) that we finalized in 

the FY 2015 IPPS/LTCH PPS final rule. 

In November 2014, we posted a 

Definitions Manual of the ICD–10 MS– 

DRGs Version 32 on the ICD–10 MS– 

DRG Conversion Project Web site at: 

http://www.cms.hhs.gov/Medicare/

Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. The HAC code 

list translations from ICD–9–CM to ICD– 

10–CM/PCS are located in Appendix I 

of the ICD–10–CM/PCS MS–DRG 

Version 32 Definitions Manual. The link 

to this Manual (available in both text 

and HTML formats) is located in the 

Downloads section of the ICD–10 MS– 

DRG Conversion Project Web site. 

With respect to the current categories 

of the HACs, we are not proposing to 

add or remove any categories in this FY 

2016 IPPS/LTCH PPS proposed rule. 

However, as described more fully in 

section III.F.7, of the preamble of this 

proposed rule, we will continue to 

monitor contemporary evidence-based 

guidelines for selected, candidate, and 

previously considered HACs that 

provide specific recommendations for 

the prevention of the corresponding 

conditions in the acute hospital setting 

and may use this information to inform 

future rulemaking. We also continue to 

encourage public dialogue about 

refinements to the HAC list through 

written stakeholder comments. We refer 

readers to section II.F.6. of the FY 2008 

IPPS final rule with comment period (72 

FR 47202 through 47218) and to section 

II.F.7. of the FY 2009 IPPS final rule (73 

FR 48774 through 48491) for detailed 

discussion supporting our 

determination regarding each of the 

current conditions. We also refer readers 

to the FY 2013 IPPS/LTCH PPS 

proposed rule (77 FR 27892 through 

27898) and final rule (77 FR 53285 

through 53292) for the HAC policy for 

FY 2013, the FY 2014 IPPS/LTCH PPS 

proposed rule (78 FR 27509 through 

27512) and final rule (78 FR 50523 


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through 50527) for the HAC policy for 

FY 2014, and the FY 2015 IPPS/LTCH 

PPS proposed rule (79 FR 28000 

through 28003) and final rule (79 FR 

49876 through 49880) for the HAC 

policy for FY 2015. 

In summary, we are proposing that 

the ICD–10–CM/PCS Version 33 HAC 

list replace the ICD–9–CM Version 32 

HAC list and are seeking public 

comments on how well the ICD–10–CM/ 

PCS Version 32 HAC list replicates the 

ICD–9–CM Version 32 HAC list. 

6. RTI Program Evaluation 

On September 30, 2009, a contract 

was awarded to RTI to evaluate the 

impact of the Hospital-Acquired 

Condition-Present on Admission (HAC– 

POA) provisions on the changes in the 

incidence of selected conditions, effects 

on Medicare payments, impacts on 

coding accuracy, unintended 

consequences, and infection and event 

rates. This was an intra-agency project 

with funding and technical support 

from CMS, OPHS, AHRQ, and CDC. The 

evaluation also examined the 

implementation of the program and 

evaluated additional conditions for 

future selection. The contract with RTI 

ended on November 30, 2012. Summary 

reports of RTI’s analysis of the FYs 

2009, 2010, and 2011 MedPAR data files 

for the HAC–POA program evaluation 

were included in the FY 2011 IPPS/

LTCH PPS final rule (75 FR 50085 

through 50101), the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51512 through 

51522), and the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53292 through 

53302). Summary and detailed data also 

were made publicly available on the 

CMS Web site at: http://www.cms.gov/

HospitalAcqCond/01_Overview.asp and 

the RTI Web site at: http://www.rti.org/ 

reports/cms/. 

In addition to the evaluation of HAC 

and POA MedPAR claims data, RTI also 

conducted analyses on readmissions 

due to HACs, the incremental costs of 

HACs to the health care system, a study 

of spillover effects and unintended 

consequences, as well as an updated 

analysis of the evidence-based 

guidelines for selected and previously 

considered HACs. Reports on these 

analyses have been made publicly 

available on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

HospitalAcqCond/index.html. 

7. RTI Reports on Evidence-Based 

Guidelines 

The RTI program evaluation included 

a report that provided references for all 

evidence-based guidelines available for 

each of the selected, candidate, and 

previously considered HACs that 

provided specific recommendations for 

the prevention of the corresponding 

conditions. Guidelines were primarily 

identified using the AHRQ National 

Guidelines Clearing House (NGCH) and 

the CDC, along with relevant 

professional societies. Guidelines 

published in the United States were 

used, if available. In the absence of U.S. 

guidelines for a specific condition, 

international guidelines were included. 

RTI prepared a final report to 

summarize its findings regarding these 

guidelines. This report is titled 

‘‘Evidence-Based Guidelines for 

Selected, Candidate, and Previously 

Considered Hospital-Acquired 

Conditions’’ and can be found on the 

CMS Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/HospitalAcqCond/Downloads/

Evidence-Based-Guidelines.pdf. 

Subsequent to this final report, RTI 

was awarded a new Evidence-Based 

Guidelines Monitoring contract. Under 

this monitoring contract, RTI annually 

provides a summary report of the 

contemporary evidence-based 

guidelines for selected, candidate, and 

previously considered HACs that 

provide specific recommendations for 

the prevention of the corresponding 

conditions in the acute care hospital 

setting. We received RTI’s 2014 report 

and made it available to the public on 

the CMS Hospital-Acquired Conditions 

Web page in the ‘‘Downloads’’ section 

at: http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

HospitalAcqCond/index.html?redirect=/

HospitalAcqCond/. 

Once we receive RTI’s 2015 report in 

the late spring or early summer, we will 

make it available to the public at this 

same link as the 2014 report. 

G. Proposed Changes to Specific MS– 

DRG Classifications 

1. Discussion of Changes to Coding 

System and Basis for MS–DRG Updates 

a. Conversion of MS–DRGs to the 

International Classification of Diseases, 

10th Revision (ICD–10) 

Providers use the code sets under the 

ICD–9–CM coding system to report 

diagnoses and procedures for Medicare 

hospital inpatient services under the 

MS–DRG system. A later coding edition, 

the ICD–10 coding system, includes the 

International Classification of Diseases, 

10th Revision, Clinical Modification 

(ICD–10–CM) for diagnosis coding and 

the International Classification of 

Diseases, 10th Revision, Procedure 

Coding System (ICD–10–PCS) for 

inpatient hospital procedure coding, as 

well as the Official ICD–10–CM and 

ICD–10–PCS Guidelines for Coding and 

Reporting. The ICD–10 coding system 

was initially adopted for transactions 

conducted on or after October 1, 2013, 

as described in the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) Administrative 

Simplification: Modifications to 

Medical Data Code Set Standards to 

Adopt ICD–10–CM and ICD–10–PCS 

Final Rule published in the Federal 

Register on January 16, 2009 (74 FR 

3328 through 3362) (hereinafter referred 

to as the ‘‘ICD–10–CM and ICD–10–PCS 

final rule’’). However, the Secretary of 

Health and Human Services issued a 

final rule that delayed the compliance 

date for ICD–10 from October 1, 2013, 

to October 1, 2014. That final rule, 

entitled ‘‘Administrative Simplification: 

Adoption of a Standard for a Unique 

Health Plan Identifier; Addition to the 

National Provider Identifier 

Requirements; and a Change to the 

Compliance Date for ICD–10–CM and 

ICD–10–PCS Medical Data Code Sets,’’ 

CMS–0040–F, was published in the 

Federal Register on September 5, 2012 

(77 FR 54664) and is available for 

viewing on the Internet at: http://

www.gpo.gov/fdsys/pkg/FR-2012-09-05/

pdf/2012-21238.pdf. On April 1, 2014, 

the Protecting Access to Medicare Act of 

2014 (PAMA) (Pub. L. 113–93) was 

enacted, which specified that the 

Secretary may not adopt ICD–10 prior to 

October 1, 2015. Accordingly, the U.S. 

Department of Health and Human 

Services released a final rule in the 

Federal Register on August 4, 2014 (79 

FR 45128 through 45134) that included 

a new compliance date that requires the 

use of ICD–10 beginning October 1, 

2015. The August 4, 2014 final rule is 

available for viewing on the Internet at: 

http://www.gpo.gov/fdsys/pkg/FR-2014- 

08-04/pdf/2014-18347.pdf. That final 

rule also requires HIPAA covered 

entities to continue to use ICD–9–CM 

through September 30, 2015. 

The anticipated move to ICD–10 

necessitated the development of an 

ICD–10–CM/ICD–10–PCS version of the 

MS–DRGs. CMS began a project to 

convert the ICD–9–CM-based MS–DRGs 

to ICD–10 MS–DRGs. In response to the 

FY 2011 IPPS/LTCH PPS proposed rule, 

we received public comments on the 

creation of the ICD–10 version of the 

MS–DRGs, which will be implemented 

at the same time as ICD–10 (75 FR 

50127 and 50128). While we did not 

propose an ICD–10 version of the MS– 

DRGs in the FY 2011 IPPS/LTCH PPS 

proposed rule, we noted that we have 

been actively involved in converting 

current MS–DRGs from ICD–9–CM 

codes to ICD–10 codes and sharing this 


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information through the ICD–10 

(previously ICD–9–CM) Coordination 

and Maintenance Committee. We 

undertook this early conversion project 

to assist other payers and providers in 

understanding how to implement their 

own conversion projects. We posted 

ICD–10 MS–DRGs based on Version 

26.0 (FY 2009) of the MS–DRGs. We 

also posted a paper that describes how 

CMS went about completing this project 

and suggestions for other payers and 

providers to follow. Information on the 

ICD–10 MS–DRG conversion project can 

be found on the ICD–10 MS–DRG 

Conversion Project Web site at: http://

www.cms.hhs.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. We have continued to keep 

the public updated on our maintenance 

efforts for ICD–10–CM and ICD–10–PCS 

coding systems, as well as the General 

Equivalence Mappings that assist in 

conversion through the ICD–10 

(previously ICD–9–CM) Coordination 

and Maintenance Committee. 

Information on these committee 

meetings can be found on the CMS Web 

site at: http://www.cms.gov/Medicare/

Coding/ICD9ProviderDiagnosticCodes/

index.html. 

During FY 2011, we developed and 

posted Version 28 of the ICD–10 MS– 

DRGs based on the FY 2011 MS–DRGs 

(Version 28) that we finalized in the FY 

2011 IPPS/LTCH PPS final rule on the 

CMS Web site. This ICD–10 MS–DRGs 

Version 28 also included the CC 

Exclusion List and the ICD–10 version 

of the hospital-acquired conditions 

(HACs), which was not posted with 

Version 26. We also discussed this 

update at the September 15–16, 2010 

and the March 9–10, 2011 meetings of 

the ICD–9–CM Coordination and 

Maintenance Committee. The minutes 

of these two meetings are posted on the 

CMS Web site at: http://www.cms.gov/

Medicare/Coding/

ICD9ProviderDiagnosticCodes/

index.html. 

We reviewed public comments on the 

ICD–10 MS–DRGs Version 28 and made 

updates as a result of these comments. 

We called the updated version the ICD– 

10 MS–DRGs Version 28–R1. We posted 

a Definitions Manual of ICD–10 MS– 

DRGs Version 28–R1 on our ICD–10 

MS–DRG Conversion Project Web site. 

To make the review of Version 28–R1 

updates easier for the public, we also 

made available pilot software on a CD– 

ROM that could be ordered through the 

National Technical Information Service 

(NTIS). A link to the NTIS ordering page 

was provided on the CMS ICD–10 MS– 

DRGs Web page. We stated that we 

believed that, by providing the ICD–10 

MS–DRGs Version 28–R1 Pilot Software 

(distributed on CD–ROM), the public 

would be able to more easily review and 

provide feedback on updates to the ICD– 

10 MS–DRGs. We discussed the updated 

ICD–10 MS–DRGs Version 28–R1 at the 

September 14, 2011 ICD–9–CM 

Coordination and Maintenance 

Committee meeting. We encouraged the 

public to continue to review and 

provide comments on the ICD–10 MS– 

DRGs so that CMS could continue to 

update the system. 

In FY 2012, we prepared the ICD–10 

MS–DRGs Version 29, based on the FY 

2012 MS–DRGs (Version 29) that we 

finalized in the FY 2012 IPPS/LTCH 

PPS final rule. We posted a Definitions 

Manual of ICD–10 MS–DRGs Version 29 

on our ICD–10 MS–DRG Conversion 

Project Web site. We also prepared a 

document that describes changes made 

from Version 28 to Version 29 to 

facilitate a review. The ICD–10 MS– 

DRGs Version 29 was discussed at the 

ICD–9–CM Coordination and 

Maintenance Committee meeting on 

March 5, 2012. Information was 

provided on the types of updates made. 

Once again, the public was encouraged 

to review and comment on the most 

recent update to the ICD–10 MS–DRGs. 

CMS prepared the ICD–10 MS–DRGs 

Version 30 based on the FY 2013 MS– 

DRGs (Version 30) that we finalized in 

the FY 2013 IPPS/LTCH PPS final rule. 

We posted a Definitions Manual of the 

ICD–10 MS–DRGs Version 30 on our 

ICD–10 MS–DRG Conversion Project 

Web site. We also prepared a document 

that describes changes made from 

Version 29 to Version 30 to facilitate a 

review. We produced mainframe and 

computer software for Version 30, 

which was made available to the public 

in February 2013. Information on 

ordering the mainframe and computer 

software through NTIS was posted on 

the ICD–10 MS–DRG Conversion Project 

Web site. The ICD–10 MS–DRGs 

Version 30 computer software facilitated 

additional review of the ICD–10 MS– 

DRGs conversion. 

We provided information on a study 

conducted on the impact of converting 

MS–DRGs to ICD–10. Information on 

this study is summarized in a paper 

entitled ‘‘Impact of the Transition to 

ICD–10 on Medicare Inpatient Hospital 

Payments.’’ This paper was posted on 

the CMS ICD–10 MS–DRGs Conversion 

Project Web site and was distributed 

and discussed at the September 15, 2010 

ICD–9–CM Coordination and 

Maintenance Committee meeting. The 

paper described CMS’ approach to the 

conversion of the MS–DRGs from ICD– 

9–CM codes to ICD–10 codes. The study 

was undertaken using the ICD–9–CM 

MS–DRGs Version 27 (FY 2010), which 

was converted to the ICD–10 MS–DRGs 

Version 27. The study estimated the 

impact on aggregate payment to 

hospitals and the distribution of 

payments across hospitals. The impact 

of the conversion from ICD–9–CM to 

ICD–10 on Medicare MS–DRG hospital 

payments was estimated using FY 2009 

Medicare claims data. The study found 

a hospital payment increase of 0.05 

percent using the ICD–10 MS–DRGs 

Version 27. 

CMS provided an overview of this 

hospital payment impact study at the 

March 5, 2012 ICD–9–CM Coordination 

and Maintenance Committee meeting. 

This presentation followed 

presentations on the creation of ICD–10 

MS–DRGs Version 29. A summary 

report of this meeting can be found on 

the CMS Web site at: http://

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/

index.html. At the March 2012 meeting, 

CMS announced that it would produce 

an update on this impact study based on 

an updated version of the ICD–10 MS– 

DRGs. This update of the impact study 

was presented at the March 5, 2013 

ICD–9–CM Coordination and 

Maintenance Committee meeting. The 

study found that moving from an ICD– 

9–CM-based system to an ICD–10 MS– 

DRG replicated system would lead to 

DRG reassignments on only 1 percent of 

the 10 million MedPAR sample records 

used in the study. Ninety-nine percent 

of the records did not shift to another 

MS–DRG when using an ICD–10 MS– 

DRG system. For the 1 percent of the 

records that shifted, 45 percent of the 

shifts were to a higher weighted MS– 

DRG, while 55 percent of the shifts were 

to lower weighted MS–DRGs. The net 

impact across all MS–DRGs was a 

reduction by 4/10000 or minus 4 

pennies per $100. The updated paper is 

posted on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/ICD10/

ICD-10-MS-DRG-ConversionProject.html under the ‘‘Downloads’’ 

section. Information on the March 5, 

2013 ICD–9–CM Coordination and 

Maintenance Committee meeting can be 

found on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

This update of the impact paper and the 

ICD–10 MS–DRG Version 30 software 

provided additional information to the 

public who were evaluating the 

conversion of the MS–DRGs to ICD–10 

MS–DRGs. 

CMS prepared the ICD–10 MS–DRGs 

Version 31.0 based on the FY 2014 MS– 

DRGs (Version 31) that we finalized in 

the FY 2014 IPPS/LTCH PPS final rule. 

In November 2013, we posted a 


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Definitions Manual of the ICD–10 MS– 

DRGs Version 31 on the ICD–10 MS– 

DRG Conversion Project Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. We also prepared a 

document that described changes made 

from Version 30 to Version 31 to 

facilitate a review. We produced 

mainframe and computer software for 

Version 31, which was made available 

to the public in December 2013. 

Information on ordering the mainframe 

and computer software through NTIS 

was posted on the CMS Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html under the ‘‘Related Links’’ 

section. This ICD–10 MS–DRGs Version 

31 computer software facilitated 

additional review of the ICD–10 MS– 

DRGs conversion. We encouraged the 

public to submit to CMS any comments 

on areas where they believed the ICD– 

10 MS–DRGs did not accurately reflect 

grouping logic found in the ICD–9–CM 

MS–DRGs Version 31. 

We reviewed public comments 

received and developed an update of 

ICD–10 MS–DRGs Version 31, which we 

called ICD–10 MS–DRGs Version 31.0– 

R. We made available a Definitions 

Manual of the ICD–10 MS–DRGs 

Version 31.0–R on the ICD–10 MS–DRG 

Conversion Project Web site at: http://

www.cms.gov/Medicare/Coding/ICD10/

ICD-10-MS-DRG-ConversionProject.html. We also prepared a 

document that describes changes made 

from Version 31 to Version 31–R to 

facilitate a review. We will continue to 

share ICD–10–MS–DRG conversion 

activities with the public through this 

Web site. 

CMS prepared the ICD–10 MS–DRGs 

Version 32 based on the FY 2015 MS– 

DRGs (Version 32) that we finalized in 

the FY 2015 IPPS/LTCH PPS final rule. 

In November 2014, we made available a 

Definitions Manual of the ICD–10 MS– 

DRGs Version 32 on the ICD–10 MS– 

DRG Conversion Project Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. We also prepared a 

document that described changes made 

from Version 31–R to Version 32 to 

facilitate a review. We produced 

mainframe and computer software for 

Version 32, which was made available 

to the public in January 2015. 

Information on ordering the mainframe 

and computer software through NTIS 

was made available on the CMS Web 

site at: http://www.cms.gov/Medicare/

Coding/ICD10/ICD-10-MS-DRGConversion-Project.html under the 

‘‘Related Links’’ section. This ICD–10 

MS–DRGs Version 32 computer 

software facilitated additional review of 

the ICD–10 MS–DRGs conversion. We 

encouraged the public to submit to CMS 

any comments on areas where they 

believed the ICD–10 MS–DRGs did not 

accurately reflect grouping logic found 

in the ICD–9–CM MS–DRGs Version 32. 

We discuss five requests from the public 

to update the ICD–10 MS–DRGs Version 

32 to better replicate the ICD–9–CM 

MS–DRGs in section II.G.3., 4., and 5. of 

the preamble of this proposed rule. 

Therefore, we are proposing to 

implement the MS–DRG code logic in 

the ICD–10 MS–DRGs Version 32 along 

with any finalized updates to the ICD– 

10 MS–DRGs Version 32 for the final 

ICD–10 MS–DRGs Version 33. In this FY 

2016 IPPS/LTCH PPS proposed rule, we 

are proposing the ICD–10 MS–DRGs 

Version 33 as the replacement logic for 

the ICD–9–CM based MS–DRGs Version 

32 as part of the proposed MS–DRG 

updates for FY 2016. We are inviting 

public comments on how well the ICD– 

10 MS–DRGs Version 32 replicates the 

logic of the MS–DRGs Version 32 based 

on ICD–9–CM codes. 

b. Basis for Proposed FY 2016 MS–DRG 

Updates 

CMS encourages input from our 

stakeholders concerning the annual 

IPPS updates when that input is made 

available to us by December 7 of the 

year prior to the next annual proposed 

rule update. For example, to be 

considered for any updates or changes 

in FY 2016, comments and suggestions 

should have been submitted by 

December 7, 2014. The comments that 

were submitted in a timely manner for 

FY 2016 are discussed below in this 

section. 

Following are the changes we are 

proposing to the MS–DRGs for FY 2016. 

We are inviting public comment on each 

of the MS–DRG classification proposed 

changes described below, as well as our 

proposals to maintain certain existing 

MS–DRG classifications, which also are 

discussed below. In some cases, we are 

proposing changes to the MS–DRG 

classifications based on our analysis of 

claims data. In other cases, we are 

proposing to maintain the existing MS– 

DRG classification based on our analysis 

of claims data. For this FY 2016 

proposed rule, our MS–DRG analysis is 

based on claims data from the December 

2014 update of the FY 2014 MedPAR 

file, which contains hospital bills 

received through September 30, 2014, 

for discharges occurring through 

September 30, 2014. In our discussion 

of the proposed MS–DRG 

reclassification changes that follows, we 

refer to our analysis of claims data from 

the ‘‘December 2014 update of the FY 

2014 MedPAR file.’’ 

As explained in previous rulemaking 

(76 FR 51487), in deciding whether to 

propose to make further modification to 

the MS–DRGs for particular 

circumstances brought to our attention, 

we consider whether the resource 

consumption and clinical characteristics 

of the patients with a given set of 

conditions are significantly different 

than the remaining patients in the MS– 

DRG. We evaluate patient care costs 

using average costs and lengths of stay 

and rely on the judgment of our clinical 

advisors to decide whether patients are 

clinically distinct or similar to other 

patients in the MS–DRG. In evaluating 

resource costs, we consider both the 

absolute and percentage differences in 

average costs between the cases we 

select for review and the remainder of 

cases in the MS–DRG. We also consider 

variation in costs within these groups; 

that is, whether observed average 

differences are consistent across 

patients or attributable to cases that are 

extreme in terms of costs or length of 

stay, or both. Further, we consider the 

number of patients who will have a 

given set of characteristics and generally 

prefer not to create a new MS–DRG 

unless it would include a substantial 

number of cases. 

In our examination of the claims data, 

we apply the following criteria 

established in FY 2008 (72 FR 47169) to 

determine if the creation of a new 

complication or comorbidity (CC) or 

major complication or comorbidity 

(MCC) subgroup within a base MS–DRG 

is warranted: 

• A reduction in variance of costs of 

at least 3 percent. 

• At least 5 percent of the patients in 

the MS–DRG fall within the CC or MCC 

subgroup. 

• At least 500 cases are in the CC or 

MCC subgroup. 

• There is at least a 20-percent 

difference in average costs between 

subgroups. 

• There is a $2,000 difference in 

average costs between subgroups. 

In order to warrant creation of a CC 

or MCC subgroup within a base MS– 

DRG, the subgroup must meet all five of 

the criteria. 

2. MDC 1 (Diseases and Disorders of the 

Nervous System): Endovascular 

Embolization (Coiling) Procedures 

We received a request again this year 

to change the MS–DRG assignment for 

endovascular embolization (coiling) 

procedures. This topic was discussed 

previously in the FY 2015 IPPS/LTCH 

PPS proposed rule (79 FR 28005 

through 28006) and in the FY 2015 


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24352 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

IPPS/LTCH PPS final rule (79 FR 49883 

through 49886). For FY 2015, we did 

not change the MS–DRG assignment for 

endovascular embolization (coiling) 

procedures. 

After issuance of the FY 2015 IPPS/ 

LTCH PPS final rule, we received a 

modified request from the commenter 

asking that CMS consider establishing 

four new MS–DRGs: 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures with Principal Diagnosis of 

Hemorrhage); 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage with MCC); 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage with CC); and 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage without CC/MCC). 

The requestor stated that these new 

suggested MS–DRGs will promote 

clinical cohesiveness and resource 

comparability. The requestor stated that 

endovascular intracranial and 

endovascular embolization procedures 

are not similar to the open craniotomy 

procedures with which they are 

currently grouped. The requestor 

asserted that the differences in costs 

between endovascular intracranial 

procedures and open craniotomy 

procedures are great, reflecting, for 

instance, the use of an operating suite 

versus interventional vascular 

catheterization lab suite, intensive care 

and other costs. 

In conjunction with the recommended 

new MS–DRGs, the requestor 

recommended that the following ICD–9– 

CM codes, which include endovascular 

embolization procedures and additional 

intracranial procedures, be removed 

from MS–DRG 020 (Intracranial 

Vascular Procedures with Principal 

Diagnosis of Hemorrhage with MCC); 

MS–DRG 021 (Intracranial Vascular 

Procedures with Principal Diagnosis of 

Hemorrhage with CC); MS–DRG 022 

(Intracranial Vascular Procedures with 

Principal Diagnosis of Hemorrhage 

without CC/MCC); MS–DRG 023 

(Craniotomy with Major Device 

Implant/Acute Complex CNS Principal 

Diagnosis with MCC or Chemo Implant); 

MS–DRG 024 (Craniotomy with Major 

Device Implant/Acute Complex CNS 

Principal Diagnosis without MCC); MS– 

DRG 025 (Craniotomy & Endovascular 

Intracranial Procedures with MCC); MS– 

DRG 026 (Craniotomy & Endovascular 

Intracranial Procedures with CC); and 

MS–DRG 027 (Craniotomy & 

Endovascular Intracranial Procedures 

without CC/MCC): 

• 00.62 (Percutaneous angioplasty of 

intracranial vessel); 

• 39.72 (Endovascular (total) 

embolization or occlusion of head and 

neck vessels); 

• 39.74 (Endovascular removal of 

obstruction from head and neck 

vessel(s)); 

• 39.75 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bare coils); 

• 39.76 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bioactive coils); and 

• 39.79 (Other endovascular 

procedures on other vessels). 

The requestor asked that the four new 

requested MS–DRGs be created using 

these procedure codes. The requestor 

suggested that the first requested new 

MS–DRG would be MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures with Principal Diagnosis of 

Hemorrhage). The principal diagnoses 

for hemorrhage would include the same 

hemorrhage codes in the current MS– 

DRGs 020, 021, and 022, which are as 

follows: 

• 094.87 (Syphilitic ruptured cerebral 

aneurysm); 

• 430 (Subarachnoid hemorrhage); 

• 431 (Intracerebral hemorrhage); 

• 432.0 (Nontraumatic extradural 

hemorrhage); 

• 432.1 (Subdural hemorrhage); and 

• 432.9 (Unspecified intracranial 

hemorrhage). 

For this first new requested MS–DRG, 

the requestor suggested that only the 

following endovascular embolization 

procedure codes would be assigned: 

• 39.72 (Endovascular (total) 

embolization or occlusion of head and 

neck vessels); 

• 39.75 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bare coils); and 

• 39.76 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bioactive coils). 

The requestor recommended that the 

three additional new MS–DRGs would 

consist of a new base MS–DRG 

subdivided into three severity levels as 

follows: 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage with MCC); 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage with CC); and 

• Recommended MS–DRG XXX 

(Endovascular Intracranial Embolization 

Procedures without Principal Diagnosis 

of Hemorrhage without CC/MCC). 

The requestor suggested that these 

three new recommended MS–DRGs 

would have endovascular embolization 

procedures as well as additional 

percutaneous and endovascular 

procedures as listed below: 

• 00.62 (Percutaneous angioplasty of 

intracranial vessel); 

• 39.72 (Endovascular (total) 

embolization or occlusion of head and 

neck vessels); 

• 39.74 (Endovascular removal of 

obstruction from head and neck 

vessel(s)); 

• 39.75 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bare coils); 

• 39.76 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bioactive coils); and 

• 39.79 (Other endovascular 

procedures on other vessels). 

ICD–10–PCS provides the following 

more detailed codes for endovascular 

embolization, which are assigned to 

MS–DRGs 020, 021, 022, 023, 024, 025, 

026, and 027 in the ICD–10 MS–DRGs 

Version 32: 

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION ASSIGNED TO MS–DRGS 020 THROUGH 027 IN ICD–10 MS– 

DRGS VERSION 32 

ICD–10–PCS code Code description 

03LG3BZ ...................... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous approach. 

03LG3DZ ...................... Occlusion of intracranial artery with intraluminal device, percutaneous approach. 

03LG4BZ ...................... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LG4DZ ...................... Occlusion of intracranial artery with intraluminal device, percutaneous endoscopic approach. 

03LH3BZ ....................... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous approach. 

03LH3DZ ...................... Occlusion of right common carotid artery with intraluminal device, percutaneous approach. 

03LH4BZ ....................... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LH4DZ ...................... Occlusion of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 


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ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION ASSIGNED TO MS–DRGS 020 THROUGH 027 IN ICD–10 MS– 

DRGS VERSION 32—Continued 

ICD–10–PCS code Code description 

03LJ3BZ ....................... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous approach. 

03LJ3DZ ....................... Occlusion of left common carotid artery with intraluminal device, percutaneous approach. 

03LJ4BZ ....................... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LJ4DZ ....................... Occlusion of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LK3BZ ....................... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03LK3DZ ....................... Occlusion of right internal carotid artery with intraluminal device, percutaneous approach. 

03LK4BZ ....................... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LK4DZ ....................... Occlusion of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LL3BZ ....................... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03LL3DZ ....................... Occlusion of left internal carotid artery with intraluminal device, percutaneous approach. 

03LL4BZ ....................... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LL4DZ ....................... Occlusion of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LM3BZ ...................... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous approach. 

03LM3DZ ...................... Occlusion of right external carotid artery with intraluminal device, percutaneous approach. 

03LM4BZ ...................... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LM4DZ ...................... Occlusion of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LN3BZ ....................... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous approach. 

03LN3DZ ...................... Occlusion of left external carotid artery with intraluminal device, percutaneous approach. 

03LN4BZ ....................... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LN4DZ ...................... Occlusion of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LP3BZ ....................... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous approach. 

03LP3DZ ....................... Occlusion of right vertebral artery with intraluminal device, percutaneous approach. 

03LP4BZ ....................... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LP4DZ ....................... Occlusion of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03LQ3BZ ...................... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous approach. 

03LQ3DZ ...................... Occlusion of left vertebral artery with intraluminal device, percutaneous approach. 

03LQ4BZ ...................... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LQ4DZ ...................... Occlusion of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03LR3DZ ...................... Occlusion of face artery with intraluminal device, percutaneous approach. 

03LR4DZ ...................... Occlusion of face artery with intraluminal device, percutaneous endoscopic approach. 

03LS3DZ ....................... Occlusion of right temporal artery with intraluminal device, percutaneous approach. 

03LS4DZ ....................... Occlusion of right temporal artery with intraluminal device, percutaneous endoscopic approach. 

03LT3DZ ....................... Occlusion of left temporal artery with intraluminal device, percutaneous approach. 

03LT4DZ ....................... Occlusion of left temporal artery with intraluminal device, percutaneous endoscopic approach. 

03VG3BZ ...................... Restriction of intracranial artery with bioactive intraluminal device, percutaneous approach. 

03VG3DZ ...................... Restriction of intracranial artery with intraluminal device, percutaneous approach. 

03VG4BZ ...................... Restriction of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VG4DZ ...................... Restriction of intracranial artery with intraluminal device, percutaneous endoscopic approach. 

03VH3BZ ...................... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous approach. 

03VH3DZ ...................... Restriction of right common carotid artery with intraluminal device, percutaneous approach. 

03VH4BZ ...................... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VH4DZ ...................... Restriction of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VJ3BZ ....................... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous approach. 

03VJ3DZ ....................... Restriction of left common carotid artery with intraluminal device, percutaneous approach. 

03VJ4BZ ....................... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VJ4DZ ....................... Restriction of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VK3BZ ...................... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03VK3DZ ...................... Restriction of right internal carotid artery with intraluminal device, percutaneous approach. 

03VK4BZ ...................... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VK4DZ ...................... Restriction of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VL3BZ ....................... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03VL3DZ ....................... Restriction of left internal carotid artery with intraluminal device, percutaneous approach. 

03VL4BZ ....................... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VL4DZ ....................... Restriction of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VM3BZ ...................... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous approach. 

03VM3DZ ...................... Restriction of right external carotid artery with intraluminal device, percutaneous approach. 

03VM4BZ ...................... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VM4DZ ...................... Restriction of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VN3BZ ...................... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous approach. 

03VN3DZ ...................... Restriction of left external carotid artery with intraluminal device, percutaneous approach. 

03VN4BZ ...................... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VN4DZ ...................... Restriction of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VP3BZ ...................... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous approach. 

03VP3DZ ...................... Restriction of right vertebral artery with intraluminal device, percutaneous approach. 

03VP4BZ ...................... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VP4DZ ...................... Restriction of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03VQ3BZ ...................... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous approach. 

03VQ3DZ ...................... Restriction of left vertebral artery with intraluminal device, percutaneous approach. 

03VQ4BZ ...................... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VQ4DZ ...................... Restriction of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03VR3DZ ...................... Restriction of face artery with intraluminal device, percutaneous approach. 


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24354 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION ASSIGNED TO MS–DRGS 020 THROUGH 027 IN ICD–10 MS– 

DRGS VERSION 32—Continued 

ICD–10–PCS code Code description 

03VR4DZ ...................... Restriction of face artery with intraluminal device, percutaneous endoscopic approach. 

03VS3DZ ...................... Restriction of right temporal artery with intraluminal device, percutaneous approach. 

03VS4DZ ...................... Restriction of right temporal artery with intraluminal device, percutaneous endoscopic approach. 

03VT3DZ ...................... Restriction of left temporal artery with intraluminal device, percutaneous approach. 

03VT4DZ ...................... Restriction of left temporal artery with intraluminal device, percutaneous endoscopic approach. 

03VU3DZ ...................... Restriction of right thyroid artery with intraluminal device, percutaneous approach. 

03VU4DZ ...................... Restriction of right thyroid artery with intraluminal device, percutaneous endoscopic approach. 

03VV3DZ ...................... Restriction of left thyroid artery with intraluminal device, percutaneous approach. 

03VV4DZ ...................... Restriction of left thyroid artery with intraluminal device, percutaneous endoscopic approach. 

For this FY 2016 IPPS/LTCH PPS 

proposed rule request, we first 

examined claims data on all intracranial 

vascular procedure cases with a 

principal diagnosis of hemorrhage 

reported in MS–DRGs 020, 021, and 022 

from the December 2014 update of the 

FY 2014 MedPAR file. The table below 

shows our findings. We found a total of 

1,755 cases with an average length of 

stay ranging from 8.28 days to 16.84 

days and average costs ranging from 

$36,998 to $71,665 in MS–DRGs 020, 

021, and 022. 

INTRACRANIAL VASCULAR PROCEDURES WITH PRINCIPAL DIAGNOSIS OF HEMORRHAGE

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRG 020 (with MCC)—All cases ......................................................................................... 1,285 16.84 $71,655 

MS–DRG 021 (with CC)—All cases ............................................................................................ 372 13.82 52,143 

MS–DRG 022 (without CC/MCC)—All cases .............................................................................. 98 8.28 36,998 

Next, we examined claims data on the 

first part of the request, which was to 

create a new MS–DRG for endovascular 

intracranial embolization procedure 

cases with a principal diagnosis of 

hemorrhage that are currently reported 

in MS–DRGs 020, 021, and 022. Our 

findings for the first part of this multipart request are shown in the table 

below. 

ENDOVASCULAR INTRACRANIAL EMBOLIZATION PROCEDURES WITH PRINCIPAL DIAGNOSIS OF HEMORRHAGE

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

Requested New Combined MS–DRG ......................................................................................... 1,275 15.6 $67,831 

The requestor suggested that this new 

requested base MS–DRG would not be 

subdivided by severity levels. Using the 

requested code logic, cases with a 

principal diagnosis of hemorrhage and 

procedure codes 39.72 (Endovascular 

(total) embolization or occlusion of head 

and neck vessels), 39.75 (Endovascular 

embolization or occlusion of vessel(s) of 

head or neck using bare coils), and 

39.76 (Endovascular embolization or 

occlusion of vessel(s) of head or neck 

using bioactive coils) would be moved 

out of MS–DRGs 020, 021, and 022 and 

into a single new MS–DRG with no 

severity levels. 

As can be seen in the table above, the 

average costs for the new requested 

combined MS–DRG would be $67,831. 

The average costs for current MS–DRGs 

020, 021, and 022 were $71,655, 

$52,143, and $36,998, respectively. 

Based on these findings, if we 

established this requested new MS– 

DRG, payments for those cases at the 

highest severity level (MS–DRG 020, 

which had average costs of $71,655) 

would be reduced. We believe that 

maintaining the current MS–DRG 

assignment for these types of procedures 

is appropriate. Our clinical advisors 

state that the current grouping of 

procedures within MS–DRGs 020, 021, 

and 022 reflects patients who are unique 

in terms of utilization and complexity 

based on the three severity levels, which 

are specifically designed to capture 

clinical differences in these patients, 

and these factors support maintaining 

the current structure. Therefore, we are 

not proposing to move cases with a 

principal diagnosis of hemorrhage and 

procedure codes 39.72, 39.75, and 39.76 

out of MS–DRGs 020, 021, and 022 and 

create a new base MS–DRG. We are 

inviting public comments on this 

proposal. 

As discussed previously, the 

requestor also recommended the 

creation of a new set of MS–DRGs for 

endovascular intracranial embolization 

procedures without a principal 

diagnosis of hemorrhage with MCC, 

with CC, and without CC/MCC. For 

these new requested MS–DRGs, the 

requestor suggested assignment of 

endovascular embolization procedures 

as well as certain other percutaneous 

and endovascular procedures. The 

complete list of endovascular 

intracranial embolization procedures 

developed by the requestor is as follows: 

• 00.62 (Percutaneous angioplasty of 

intracranial vessel); 

• 39.72 (Endovascular (total) 

embolization or occlusion of head and 

neck vessels); 

• 39.74 (Endovascular removal of 

obstruction from head and neck 

vessel(s)); 

• 39.75 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bare coils); 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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• 39.76 (Endovascular embolization 

or occlusion of vessel(s) of head or neck 

using bioactive coils); and 

• 39.79 (Other endovascular 

procedures on other vessels) 

The following table shows our 

findings from examination of claims 

data on endovascular intracranial 

procedures without a principal 

diagnosis of hemorrhage reported in 

MS–DRGs 023 through 027 from the 

December 2014 update of the FY 2014 

MedPAR file. 

ENDOVASCULAR INTRACRANIAL PROCEDURES WITHOUT PRINCIPAL DIAGNOSIS OF HEMORRHAGE

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRG 023—All cases ............................................................................................................ 5,615 10.96 $37,784 

MS–DRG 023—Cases with endovascular intracranial procedure without diagnosis of hemorrhage ........................................................................................................................................ 1,510 8.88 39,666 

MS–DRG 024—All cases ............................................................................................................ 1,848 5.93 26,195 

MS–DRG 024—Cases with endovascular intracranial procedure without diagnosis of hemorrhage ........................................................................................................................................ 867 5.80 27,975 

MS–DRG 025—All cases ............................................................................................................ 16,949 9.35 29,970 

MS–DRG 025—Cases with endovascular intracranial procedure without diagnosis of hemorrhage ........................................................................................................................................ 650 8.52 44,082 

MS–DRG 026—All cases ............................................................................................................ 8,075 6.09 21,414 

MS–DRG 026—Cases with endovascular intracranial procedure without diagnosis of hemorrhage ........................................................................................................................................ 778 3.07 26,594 

MS–DRG 027—All cases ............................................................................................................ 9,883 3.15 16,613 

MS–DRG 027—Cases with endovascular intracranial procedure without diagnosis of hemorrhage ........................................................................................................................................ 1,793 1.66 22,244 

As can be seen from this table, if we 

created a new set of MS–DRGs 

recommended by the requester, most of 

the cases would have to be moved out 

of MS–DRGs 023 and 027. The 1,510 

cases that would have to be moved out 

of MS–DRG 023 have average costs of 

$39,666 compared to average costs of 

$37,784 for all cases in MS–DRG 023. 

The average costs for these cases are not 

significantly different from the average 

costs for all cases in MS–DRG 023. The 

average length of stay for the cases with 

endovascular intracranial procedure 

without a diagnosis of hemorrhage in 

MS–DRG 023 is 8.88 compared to 10.96 

days for all cases in MS–DRG 023. We 

believe that these data support the 

current MS–DRG assignment for MS– 

DRG 023. The 1,793 cases that would 

have to be moved out of MS–DRG 027 

have average costs of $22,244 compared 

to the average costs of $16,613 for all 

cases in MS–DRG 027. While the 

average costs for these cases are higher 

than for all cases in MS–DRG 027, one 

would expect some procedures within 

an MS–DRG to have higher average 

costs and other procedures to have 

lower average costs than the overall 

average costs. Cases within the MS– 

DRGs describing endovascular 

intracranial procedures are grouped 

together based on similar clinical and 

resource criteria. Some cases will have 

average costs that are higher than the 

overall average costs for cases in the 

MS–DRG, while other cases will have 

lower average costs. These differences 

in average costs are found within all 

MS–DRGs. The average length of stay of 

MS–DRG 027 cases with endovascular 

intracranial procedure without a 

diagnosis of hemorrhage is 1.66 days as 

compared to 3.15 days for all cases in 

MS–DRG 027. Therefore, while the 

average costs are higher for the cases 

with endovascular intracranial 

procedure without a diagnosis of 

hemorrhage than for all cases in MS– 

DRG 027, the length of stay is shorter. 

The 867 cases that would have to be 

moved out of MS–DRG 024 have average 

costs of $27,975 compared to average 

costs for all cases in MS–DRG 024 of 

$26,195. The average costs for these 

cases are not significantly different than 

the average costs for all cases in MS– 

DRG 024. The average length of stay for 

the 867 cases that would have to be 

moved out of MS–DRG 024 is 5.80 

compared to 5.93 for all cases in MS– 

DRG 024. Therefore, the lengths of stay 

for the cases also are quite similar in 

MS–DRG 024. We have determined that 

these data findings support maintaining 

the current MS–DRG assignment of 

these procedures in MS–DRG 024. 

MS–DRGs 025 and 026 show the 

smallest number of cases that would 

have to be moved to the requested new 

MS–DRGs, but these cases have larger 

differences in average costs. The average 

costs of cases that would have to be 

moved out of MS–DRG 025 are $44,082 

compared to $29,970 for all cases in 

MS–DRG 025. The average length of stay 

for the MS–DRG 025 cases with 

endovascular intracranial procedure 

without a diagnosis of hemorrhage is 

8.52 days as compared to 9.35 days for 

all cases in MS–DRG 025. Therefore, the 

lengths of stay are similar for cases in 

MS–DRG 025. The average costs of cases 

that would have to be moved out of MS– 

DRG 026 are $26,594 compared to 

$21,414 for all cases. The average length 

of stay for cases that would have to be 

moved out of MS–DRG 026 is 3.07 days 

compared to 6.09 days for all cases in 

MS–DRG 026, or almost half as long as 

for all cases in MS–DRG 026. As stated 

earlier, the average costs for cases that 

would be moved out of MS–DRGs 023, 

024, 025, 026, and 027 under this 

request are higher than the average costs 

for all cases in these MS–DRGs, with 

most of the cases coming out of MS– 

DRGs 023 and 027. The average costs for 

these particular cases in MS–DRG 023 

are not significantly different from the 

average costs for all cases in MS–DRG 

023. In addition, while the average costs 

are higher for the cases with a 

endovascular intracranial procedure 

without a diagnosis of hemorrhage than 

for all cases in MS–DRG 027, the length 

of stay is shorter. We have determined 

that the overall data do not support 

making the requested MS–DRG updates 

to MS–DRGs 023, 024, 025, 026, and 027 

and creating three new MS–DRGs. 

Therefore, we are not proposing to make 

changes to the current structure for MS– 

DRGs 023 through 027. 

In summary, our clinical advisors 

reviewed each aspect of this multi-part 

request and advised us that the 

endovascular embolization procedures 

are appropriately assigned to MS–DRGs 

020 through 027. They do not support 

removing the procedures (procedure 

codes 39.72, 39.75, and 39.76) from MS– 

DRGs 020, 021, and 022 and creating a 

single MS–DRG for endovascular 

intracranial embolization procedures 


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with a principal diagnosis of 

hemorrhage with no severity levels. Our 

clinical advisors stated that the current 

MS–DRG grouping of three severity 

levels captures differences in clinical 

severity, average costs, and length of 

stay for these patients appropriately. 

Our clinical advisors also recommended 

maintaining the current MS–DRG 

assignments for endovascular 

embolization and other percutaneous 

and endovascular procedures within 

MS–DRGs 023 through 027. They stated 

that these procedures are all clinically 

similar to others in these MS–DRGs. In 

addition, they stated that the surgical 

techniques are all designed to correct 

the same clinical problem, and they 

advised against moving a select number 

of those procedures out of MS–DRGs 

023 through 027. 

Based on the findings from our data 

analysis and the recommendations from 

our clinical advisors, we are not 

proposing to create the four new MS– 

DRGs for endovascular intracranial 

embolization and other endovascular 

procedures recommended by the 

requestor. We are proposing to maintain 

the current MS–DRG structure for MS– 

DRGs 020 through 027. 

We are inviting public comments on 

these two proposals. 

3. MDC 5 (Diseases and Disorders of the 

Circulatory System) 

a. Adding Severity Levels to MS–DRGs 

245 Through 251 

During the comment period for the FY 

2015 IPPS/LTCH PPS proposed rule, we 

received a comment that recommended 

establishing severity levels for MS–DRG 

245 (AICD Generator Procedures) and 

including additional severity levels for 

MS–DRG 246 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/ 

Stents); MS–DRG 247 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent without MCC); MS–DRG 

248 (Percutaneous Cardiovascular 

Procedure with Non-Drug-Eluting Stent 

with MCC or 4+ Vessels/Stents); MS– 

DRG 249 (Percutaneous Cardiovascular 

Procedure with Non-Drug-Eluting Stent 

without MCC); MS–DRG 250 

(Percutaneous Cardiovascular Procedure 

without Coronary Artery Stent with 

MCC); and MS–DRG 251 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent without MCC). 

We considered this public comment 

to be outside of the scope of the FY 2015 

IPPS/LTCH PPS proposed rule. 

Therefore, we did not address this 

comment in the FY 2015 IPPS/LTCH 

PPS final rule. However, we indicated 

that we would consider the public 

comment for possible proposals in 

future rulemaking as part of our annual 

review process. 

For this FY 2016 IPPS/LTCH PPS 

proposed rule, we received a separate, 

but related, request involving most of 

these same MS–DRGs. Therefore, for 

this proposed rule, we conducted a 

simultaneous analysis of claims data to 

address both the FY 2015 public 

comment request and the related FY 

2016 request. We discuss both of these 

requests below. 

b. Percutaneous Intracardiac Procedures 

We received a request to remove the 

cardiac ablation and other specified 

cardiovascular procedures from the 

following MS–DRGs, and to create new 

MS–DRGs to classify these procedures: 

• MS–DRG 246 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/ 

Stents); 

• MS–DRG 247 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent without MCC); 

• MS–DRG 248 (Percutaneous 

Cardiovascular Procedure with NonDrug-Eluting Stent with MCC or 4+ 

Vessels/Stents); 

• MS–DRG 249 (Percutaneous 

Cardiovascular Procedure with NonDrug-Eluting Stent without MCC); 

• MS–DRG 250 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent with MCC); and 

• MS–DRG 251 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent without MCC). 

The commenter stated that, 

historically, the MS–DRGs listed above 

appropriately reflected the differential 

cost of percutaneous transluminal 

coronary angioplasty (PTCA) procedures 

with and without stents. The 

commenter noted that PTCA procedures 

with drug eluting stents were previously 

paid the highest, followed by PTCA 

procedures with bare metal stents and 

PTCA procedures with no stents, 

respectively. However, the commenter 

believed that, in recent years, the 

opposite has begun to occur and cases 

reporting a PTCA procedure without a 

stent are being paid more than cases 

reporting a PTCA procedure with a 

stent. The commenter further noted that 

cardiac ablation procedures and PTCA 

procedures without stents are currently 

assigned to the same MS–DRGs, 

notwithstanding that the procedures 

have different clinical objectives and 

patient diagnoses. The commenter 

indicated that cardiac ablation 

procedures are performed on patients 

with multiple distinct cardiac 

arrhythmias to alter electrical 

conduction systems of the heart, and 

PTCA procedures are performed on 

patients with coronary atherosclerosis to 

open blocked coronary arteries. The 

commenter also noted that cardiac 

ablation procedures are performed in 

the heart chambers by cardiac 

electrophysiologists, require 

significantly more resources, and 

require longer periods of time to 

complete. Conversely, PTCA procedures 

are performed in the coronary vessels by 

interventional cardiologists, require the 

use of less equipment, and require a 

shorter period of time to complete. 

Therefore, the commenter suggested that 

CMS create new MS–DRGs for 

percutaneous intracardiac procedures to 

help improve clinical homogeneity by 

differentiating percutaneous 

intracardiac procedures (performed 

within the heart chambers) from 

percutaneous intracoronary procedures 

(performed within the coronary vessels). 

The commenter further believed that 

creating new MS–DRGs for these 

procedures would also better reflect the 

resource cost of specialized equipment 

used for more complex structures of 

electrical conduction systems when 

performing cardiac ablation procedures. 

The following ICD–9–CM procedure 

codes identify and describe the cardiac 

ablation procedures and the other 

percutaneous intracardiac procedures 

that are currently classified under MS– 

DRGs 246 through 251 and that the 

commenter recommended that CMS 

assign to the newly created MS–DRGs: 

• 35.52 (Repair of atrial septal defect 

with prosthesis, closed technique); 

• 35.96 (Percutaneous balloon 

valvuloplasty); 

• 35.97 (Percutaneous mitral valve 

repair with implant); 

• 37.26 (Catheter based invasive 

electrophysiologic testing); 

• 37.27 (Cardiac mapping); 

• 37.34 (Excision or destruction of 

other lesion or tissue of heart, 

endovascular approach); 

• 37.36 (Excision, destruction, or 

exclusion of left atrial appendage 

(LAA)); and 

• 37.90 (Insertion of left atrial 

appendage device). 

There are a number of ICD–10–PCS 

code translations that provide more 

detailed and specific information for 

each of the ICD–9–CM procedure codes 

listed above that also are currently 

classified under MS–DRGs 246 through 

251 based on the GROUPER Version 32 

ICD–10 MS–DRGs. The comparable 

ICD–10–PCS code translations for ICD– 

9–CM procedure code 35.52 are shown 

in the following table. 


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ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.52 

ICD–10–PCS code Code description 

02U53JZ ....................... Supplement atrial septum with synthetic substitute, percutaneous approach. 

02U54JZ ....................... Supplement atrial septum with synthetic substitute, percutaneous endoscopic approach. 

The comparable ICD–10–PCS code 

translations for ICD–9–CM procedure 

code 35.96 are shown in the following 

table. 

ICD–10–PCS TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.96 

ICD–10–PCS code Code description 

027F34Z ....................... Dilation of aortic valve with drug-eluting intraluminal device, percutaneous approach. 

027F3DZ ....................... Dilation of aortic valve with intraluminal device, percutaneous approach. 

027F3ZZ ....................... Dilation of aortic valve, percutaneous approach. 

027F44Z ....................... Dilation of aortic valve with drug-eluting intraluminal device, percutaneous endoscopic approach.

027F4DZ ....................... Dilation of aortic valve with intraluminal device, percutaneous endoscopic approach. 

027F4ZZ ....................... Dilation of aortic valve, percutaneous endoscopic approach. 

027G34Z ....................... Dilation of mitral valve with drug-eluting intraluminal device, percutaneous approach. 

027G3DZ ...................... Dilation of mitral valve with intraluminal device, percutaneous approach. 

027G3ZZ ....................... Dilation of mitral valve, percutaneous approach. 

027G44Z ....................... Dilation of mitral valve with drug-eluting intraluminal device, percutaneous endoscopic approach.

027G4DZ ...................... Dilation of mitral valve with intraluminal device, percutaneous endoscopic approach. 

027G4ZZ ....................... Dilation of mitral valve, percutaneous endoscopic approach. 

027H34Z ....................... Dilation of pulmonary valve with drug-eluting intraluminal device, percutaneous approach. 

027H3DZ ...................... Dilation of pulmonary valve with intraluminal device, percutaneous approach. 

027H3ZZ ....................... Dilation of pulmonary valve, percutaneous approach. 

027H44Z ....................... Dilation of pulmonary valve with drug-eluting intraluminal device, percutaneous endoscopic approach. 

027H4DZ ...................... Dilation of pulmonary valve with intraluminal device, percutaneous endoscopic approach. 

027H4ZZ ....................... Dilation of pulmonary valve, percutaneous endoscopic approach. 

027J34Z ........................ Dilation of tricuspid valve with drug-eluting intraluminal device, percutaneous approach. 

027J3DZ ....................... Dilation of tricuspid valve with intraluminal device, percutaneous approach. 

027J3ZZ ........................ Dilation of tricuspid valve, percutaneous approach. 

027J44Z ........................ Dilation of tricuspid valve with drug-eluting intraluminal device, percutaneous endoscopic approach. 

027J4DZ ....................... Dilation of tricuspid valve with intraluminal device, percutaneous endoscopic approach. 

027J4ZZ ........................ Dilation of tricuspid valve, percutaneous endoscopic approach. 

The ICD–10–PCS code translation for 

ICD–9–CM procedure code 35.97 is 

02UG3JZ (Supplement mitral valve with 

synthetic substitute, percutaneous 

approach.). 

The ICD–10–PCS code translation for 

ICD–9–CM procedure code 37.26 is 

4A023FZ (Measurement of cardiac 

rhythm, percutaneous approach.). 

The comparable ICD–10–PCS code 

translations for ICD–9–CM procedure 

code 37.27 are shown in the following 

table. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.27 

ICD–10–PCS code Code description 

02K83ZZ ....................... Map conduction mechanism, percutaneous approach. 

02K84ZZ ....................... Map conduction mechanism, percutaneous endoscopic approach. 

The comparable ICD–10–PCS code 

translations for ICD–9–CM procedure 

code 37.34 are shown in the following 

table: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.34 

ICD–10–PCS code Code description 

02553ZZ ....................... Destruction of atrial septum, percutaneous approach. 

02563ZZ ....................... Destruction of right atrium, percutaneous approach. 

02573ZZ ....................... Destruction of left atrium, percutaneous approach. 

02583ZZ ....................... Destruction of conduction mechanism, percutaneous approach. 

02593ZZ ....................... Destruction of chordae tendineae, percutaneous approach. 

025F3ZZ ....................... Destruction of aortic valve, percutaneous approach. 

025G3ZZ ....................... Destruction of mitral valve, percutaneous approach. 

025H3ZZ ....................... Destruction of pulmonary valve, percutaneous approach. 

025J3ZZ ........................ Destruction of tricuspid valve, percutaneous approach. 

025K3ZZ ....................... Destruction of right ventricle, percutaneous approach. 

025L3ZZ ....................... Destruction of left ventricle, percutaneous approach. 


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ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.34—Continued 

ICD–10–PCS code Code description 

025M3ZZ ...................... Destruction of ventricular septum, percutaneous approach. 

02B53ZZ ....................... Excision of atrial septum, percutaneous approach. 

02B63ZZ ....................... Excision of right atrium, percutaneous approach. 

02B73ZZ ....................... Excision of left atrium, percutaneous approach. 

02B83ZZ ....................... Excision of conduction mechanism, percutaneous approach. 

02B93ZZ ....................... Excision of chordae tendineae, percutaneous approach. 

02BF3ZZ ....................... Excision of aortic valve, percutaneous approach. 

02BG3ZZ ...................... Excision of mitral valve, percutaneous approach. 

02BH3ZZ ...................... Excision of pulmonary valve, percutaneous approach. 

02BJ3ZZ ....................... Excision of tricuspid valve, percutaneous approach. 

02BM3ZZ ...................... Excision of ventricular septum, percutaneous approach. 

02T83ZZ ....................... Resection of conduction mechanism, percutaneous approach. 

The comparable ICD–10–PCS code 

translations for ICD–9–CM procedure 

code 37.36 are shown in the following 

table: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.36 

ICD–10–PCS code Code description 

02573ZK ....................... Destruction of left atrial appendage, percutaneous approach. 

02574ZK ....................... Destruction of left atrial appendage, percutaneous endoscopic approach. 

02B73ZK ....................... Excision of left atrial appendage, percutaneous approach. 

02B74ZK ....................... Excision of left atrial appendage, percutaneous endoscopic approach. 

02L73ZK ....................... Occlusion of left atrial appendage, percutaneous approach. 

02L74ZK ....................... Occlusion of left atrial appendage, percutaneous endoscopic approach. 

The comparable ICD–10–PCS code 

translations for ICD–9–CM procedure 

code 37.90 are shown in the following 

table: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.90 

ICD–10–PCS code Code description 

02L73CK ....................... Occlusion of left atrial appendage with extraluminal device, percutaneous approach. 

02L73DK ....................... Occlusion of left atrial appendage with intraluminal device, percutaneous approach. 

02L74CK ....................... Occlusion of left atrial appendage with extraluminal device, percutaneous endoscopic approach. 

02L74DK ....................... Occlusion of left atrial appendage with intraluminal device, percutaneous endoscopic approach. 

The ICD–10–PCS code translations 

listed above, along with their respective 

MS–DRG assignments, can be found in 

the ICD–10 MS–DRGs Version 32 

Definitions Manual posted on the CMS 

Web site at: http://www.cms.gov/

Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. 

As mentioned earlier, we received a 

separate, but related, request to add 

severity levels to MS–DRGs 246 through 

251. We address this request at the end 

of this section. 

To address the first of these separate, 

but related, requests, we reviewed 

claims data for MS–DRGs 246 through 

251 from the December 2014 update of 

the FY 2014 MedPAR file. Our findings 

are shown in the following table: 

PERCUTANEOUS CARDIOVASCULAR MS–DRGS WITH AND WITHOUT STENTS

MS–DRG Number 

of cases 

Average 

length of 

stay 

Average 

costs 

MS–DRG 246—All cases ............................................................................................................ 30,617 5.52 $23,855 

MS–DRG 246—Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 244 9.69 $34.099 

MS–DRG 247—All cases ............................................................................................................ 79,639 2.69 $15,671 

MS–DRG 247—Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 260 5.20 $25,797 

MS–DRG 248—All cases ............................................................................................................ 9,310 6.37 $22,504 

MS–DRG 248 –Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 125 10.76 $33,521 

MS–DRG 249—All cases ............................................................................................................ 16,273 3.08 $14,066 

MS–DRG 249—Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 81 5.12 $23,710 

MS–DRG 250—All cases ............................................................................................................ 9,275 7.07 $22,902 


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PERCUTANEOUS CARDIOVASCULAR MS–DRGS WITH AND WITHOUT STENTS—Continued 

MS–DRG Number 

of cases 

Average 

length of 

stay 

Average 

costs 

MS–DRG 250– Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 5,826 7.90 $24,841 

MS–DRG 251—All cases ............................................................................................................ 20,945 3.25 $15,757 

MS–DRG 251—Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90 ................................................................................................................................. 14,436 3.39 $17,290 

As shown in the table above, there 

were a total of 30,617 cases in MS–DRG 

246, with an average length of stay of 

5.52 days and average costs of $23,855. 

For cases reporting a percutaneous 

intracardiac procedure in MS–DRG 246 

(ICD–9–CM procedure codes 35.52, 

35.96, 35.97, 37.26, 37.27, 37.34, 37.36, 

and 37.90), there were a total of 244 

cases, with an average length of stay of 

9.69 days and average costs of $34,099. 

For MS–DRGs 247 through 251, a 

similar pattern was identified; the data 

reflected that the average costs are 

higher and the average length of stay is 

greater for cases reporting a 

percutaneous intracardiac procedure in 

comparison to the average costs and 

average length of stay for all of the cases 

in their respective MS–DRGs. 

As reflected in the following table, a 

further analysis of the data showed that 

percutaneous intracardiac procedures 

represent a total of 20,972 cases in MS– 

DRGs 246 through 251, with a greater 

average length of stay (4.79 days versus 

3.62 days) and higher average costs 

($19,810 versus $17,532) in comparison 

to all of the remaining cases in MS– 

DRGs 246 through 251. 

SUMMARY OF PERCUTANEOUS CARDIOVASCULAR DRGS WITH AND WITHOUT STENTS

MS–DRG Number 

of cases 

Average 

length of 

stay 

Average 

costs 

MS–DRGs 246 through 251—Cases with procedure codes 35.52, 35.96, 35.97, 37.26, 37.27, 

37.34, 37.36, and 37.90 ........................................................................................................... 20,972 4.79 $19,810 

MS–DRGs 246 through 251—Cases without procedure codes 35.52, 35.96, 35.97, 37.26, 

37.27, 37.34, 37.36, and 37.90 ................................................................................................ 145,087 3.62 17,532 

The results of these data analyses 

support removing procedures performed 

within the heart chambers using 

intracardiac techniques from MS–DRGs 

246 through 251, and assigning these 

procedures to separate MS–DRGs. The 

results of these data analyses also 

support subdividing these MS–DRGs 

using the ‘‘with MCC’’ and ‘‘without 

MCC’’ severity levels based on the 

application of the criteria established in 

the FY 2008 IPPS final rule (72 FR 

47169), and described in section 

II.G.1.b. of the preamble of this 

proposed rule, that must be met to 

warrant the creation of a CC or an MCC 

subgroup within a base MS–DRG. Our 

clinical advisors also agree that this 

differentiation would improve the 

clinical homogeneity of these MS–DRGs 

by separating percutaneous intracardiac 

procedures (performed within the heart 

chambers) from percutaneous 

intracoronary procedures (performed 

within the coronary vessels). In 

addition, we believe that creating these 

new MS–DRGs would better reflect the 

resource cost of specialized equipment 

used to perform more complex 

structures of electrical conduction 

systems during cardiac ablation 

procedures. Therefore, for FY 2016, we 

are proposing to create two new MS– 

DRGs to classify percutaneous 

intracardiac procedures. Specifically, 

we are proposing to create MS–DRG 

273, entitled ‘‘Percutaneous Intracardiac 

Procedures with MCC,’’ and MS–DRG 

274, entitled ‘‘Percutaneous Intracardiac 

Procedures without MCC,’’ and to assign 

the procedures performed within the 

heart chambers using intracardiac 

techniques to the two proposed new 

MS–DRGs. We are proposing that 

existing percutaneous intracoronary 

procedures with and without stents 

continue to be assigned to the other 

MS–DRGs to reflect that those 

procedures are performed within the 

coronary vessels and require fewer 

resources. 

The table below represents the 

distribution of cases, average length of 

stay, and average costs for these 

proposed two new MS–DRGs. 

PROPOSED NEW MS–DRGS FOR PERCUTANEOUS INTRACARDIAC PROCEDURES

MS–DRG Number 

of cases 

Average 

length of 

stay 

Average 

costs 

Proposed MS–DRG 273 with MCC ............................................................................................. 6,195 8.03 $25,380 

Proposed MS–DRG 274 without MCC ........................................................................................ 14,777 3.44 17,475 

We are inviting public comments on 

our proposal to create the two new MS– 

DRGs for percutaneous intracardiac 

procedures for FY 2016. In addition, we 

are inviting public comments on the 

ICD–10–PCS code translations that were 

presented earlier in this section and our 

proposal to assign these procedure 

codes to the proposed new MS–DRGs 

273 and 274. 

As mentioned earlier in this section, 

we received a similar request in 


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response to the FY 2015 IPPS/LTCH 

PPS proposed rule to add severity levels 

to MS–DRGs 246 through 251. We 

considered this public comment to be 

outside of the scope of the FY 2015 

IPPS/LTCH PPS proposed rule. 

Therefore, we did not address this 

comment in the FY 2015 IPPS/LTCH 

PPS final rule. However, we indicated 

that we would consider the public 

comment for possible proposals in 

future rulemaking as part of our annual 

review process. Specifically, the 

commenter recommended including 

additional severity levels for MS–DRGs 

246 through 251 and establishing 

severity levels for MS–DRG 245 (AICD 

Generator Procedures). 

For our data analysis for this 

recommendation, we examined claims 

data from the December 2014 update of 

the FY 2014 MedPAR file to determine 

if including additional severity levels in 

MS–DRGs 246 through 251 was 

warranted. During our analysis, we 

applied the criteria established in the 

FY 2008 IPPS final rule (72 FR 47169), 

as described in section II.G.1.b. of the 

preamble of this proposed rule. As 

shown in the table below, we collapsed 

MS–DRGs 246 through 251 into base 

MS–DRGs (MS–DRGs 246, 248, and 250) 

by suggested severity level and applied 

the criteria. 

Percutaneous cardiovascular MS–DRG with and without stent procedures 

by suggested severity level 

Number 

of cases 

Average 

length of 

stay 

Average 

costs 

Suggested MS–DRG 246 with MCC ........................................................................................... 30,617 5.52 $23,855 

Suggested MS–DRG 246 with CC .............................................................................................. 45,313 2.96 16,233 

Suggested MS–DRG 246 without CC/MCC ................................................................................ 34,326 2.33 14,928 

Suggested MS–DRG 248 with MCC ........................................................................................... 9,310 6.37 22,504 

Suggested MS–DRG 248 with CC .............................................................................................. 9,510 3.49 14,798 

Suggested MS–DRG 248 without CC/MCC ................................................................................ 6,763 2.51 13,037 

Suggested MS–DRG 250 with MCC ........................................................................................... 9,275 7.07 22,903 

Suggested MS–DRG 250 with CC .............................................................................................. 11,653 3.80 16,113 

Suggested MS–DRG 250 without CC/MCC ................................................................................ 9,292 2.56 15,310 

We found that the criterion that there 

be a $2,000 difference in average costs 

between subgroups was not met. 

Specifically, between the ‘‘with CC’’ and 

‘‘without CC/MCC’’ subgroups for base 

MS–DRG 246, the difference in average 

costs was only $1,305; for base MS–DRG 

248, the difference in average costs was 

only $1,761; and for base MS–DRG 250, 

the difference in average costs was only 

$803. The results of the data analysis of 

MS–DRGs 246 through 251 confirmed, 

and our clinical advisors agreed, that 

the existing 2-way severity level splits 

for these MS–DRGs (with MCC and 

without MCC) are appropriate, as 

displayed in the table below. 

PERCUTANEOUS CARDIOVASCULAR MS–DRGS WITH AND WITHOUT STENTS

MS–DRG Number of 

cases 

Average 

length of stay 

Average 

costs 

MS–DRG 246—All cases ............................................................................................................ 30,617 5.52 $23,855 

MS–DRG 247—All cases ............................................................................................................ 79,639 2.69 15,671 

MS–DRG 248—All cases ............................................................................................................ 9,310 6.37 22,504 

MS–DRG 249—All cases ............................................................................................................ 16,273 3.08 14,066 

MS–DRG 250—All cases ............................................................................................................ 9,275 7.07 22,903 

MS–DRG 251—All cases ............................................................................................................ 20,945 3.25 15,757 

Therefore, we are not proposing to 

further subdivide the severity levels for 

MS–DRGs 246 through 251. We are 

inviting public comments on our 

proposal not to create additional 

severity levels for MS–DRGs 246 

through 251. 

Using the same MedPAR claims data 

for FY 2014, we separately examined 

cases in MS–DRG 245 to determine 

whether to subdivide this MS–DRG into 

severity levels. As displayed in the table 

below, the results of the FY 2014 data 

analysis showed there were a total of 

1,699 cases, with an average length of 

stay of 5.49 days and average costs of 

$34,287, in MS–DRG 245. 

AICD GENERATOR PROCEDURES

MS–DRG Number of 

cases 

Average 

length of stay 

Average 

costs 

MS–DRG 245—All cases ............................................................................................................ 1,699 5.49 $34,287 

We applied the five criteria 

established in the FY 2008 IPPS final 

rule (72 FR 47169), as described in 

section II.G.1.b. of the preamble of this 

proposed rule, to determine if it was 

appropriate to subdivide MS–DRG 245 

into severity levels. The table below 

illustrates our findings. 

AICD generator procedures by suggested severity level Number of 

cases 

Average 

length of stay 

Average 

costs 

Suggested MS–DRG 245 with MCC ........................................................................................... 542 8.15 $40,004 


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AICD generator procedures by suggested severity level Number of 

cases 

Average 

length of stay 

Average 

costs 

Suggested MS–DRG 245 with CC .............................................................................................. 939 4.51 32,237 

Suggested MS–DRG 245 without CC/MCC ................................................................................ 218 3.12 28,907 

Based on the analysis of the FY 2014 

claims data for MS–DRG 245, the results 

support creating a ‘‘with MCC’’ and a 

‘‘without MCC’’ severity level split. Our 

clinical advisors indicated that it would 

not be clinically appropriate to add 

severity levels based on an isolated 

year’s data fluctuation because this 

could lead to a lack of stability in MS– 

DRG payments. We agree with our 

clinical advisors and note that we 

annually conduct an analysis of base 

MS–DRGs to evaluate if additional 

severity levels are warranted. This 

analysis includes 2 years of MedPAR 

claims data to specifically compare data 

results from 1 year to the next to avoid 

making determinations about whether 

additional severity levels are warranted 

based on an isolated year’s data 

fluctuation. Generally, in past years, for 

our review of requests to add or 

establish severity levels, in our analysis 

of the most recent claims data, there was 

at least one criterion that was not met. 

Therefore, it was not necessary to 

further analyze data beyond 1 year. 

However, the results of our analysis of 

claims data in the December 2014 

update of the FY 2014 MedPAR file for 

this particular request involving MS– 

DRG 245 demonstrate that all five 

criteria to establish subgroups were met, 

and, therefore, it was necessary to also 

examine the FY 2013 MedPAR claims 

data file. 

The results of our analysis from the 

December 2013 update of the FY 2013 

claims data for MS–DRG 245 are shown 

in the table below. 

AICD GENERATOR PROCEDURES

MS–DRG Number of 

cases 

Average 

length of stay 

Average 

costs 

MS–DRG 245—All cases ............................................................................................................ 1,850 4.81 $33,272 

The FY 2013 claims data for MS–DRG 

245 do not support creating any severity 

levels because the data did not meet one 

or more of the five required criteria for 

creating new severity levels. The data 

did not meet the requirement for a 3- 

way severity level split (with MCC, with 

CC, and without CC/MCC) or a 2-way 

severity level split (with MCC and 

without MCC) because there were not at 

least 500 cases in the MCC subgroup. 

While the data did meet this particular 

criterion for the 2-way severity level 

split of ‘‘with CC/MCC’’ and ‘‘without 

CC/MCC’’ because there were at least 

500 cases in the CC subgroup, the data 

did not meet the criterion that there be 

at least a 20-percent difference in 

average costs between subgroups, as 

shown in the table below. 

AICD GENERATOR PROCEDURES

MS–DRG by suggested severity level Number of 

cases 

Average 

length of stay 

Average 

costs 

MS–DRG 245 with MCC ............................................................................................................. 44 7.32 $39,536 

MS–DRG 245 with CC ................................................................................................................ 1,118 4.26 31,786 

MS–DRG 245 without CC/MCC .................................................................................................. 288 3.10 29,383 

As stated previously, we believe that 

2 years of data showing that the 

requested CC or MCC subgroup meets 

all five of the established criteria for 

creating severity levels are needed in 

order to support a proposal to add 

severity levels for MS–DRG 245. Our 

clinical advisors also agree that it would 

not be clinically appropriate to add 

severity levels based on an isolated 

year’s data fluctuation because this 

could lead to a lack of stability in 

payments. Therefore, we are not 

proposing to add severity levels for MS– 

DRG 245 for FY 2016. We are inviting 

public comments on the results of our 

analysis and our proposal not to create 

severity levels for MS–DRG 245. 

c. Zilver® PTX Drug-Eluting Peripheral 

Stent (Zilver® PTX®) 

Zilver® PTX Drug-Eluting Peripheral 

Stent (Zilver® PTX®) was approved for 

new technology add-on payments in FY 

2014 (78 FR 50583 through 50585). 

Cases involving the Zilver® PTX® that 

are eligible for new technology add-on 

payments are identified by ICD–9–CM 

procedure code 00.60 (Insertion of drugeluting stent(s) of superficial femoral 

artery). 

We received a request from the 

manufacturer for an extension of new 

technology add-on payments for Zilver®

PTX® in FY 2016. In the request, the 

manufacturer asked CMS to consider 

three options for procedure code 00.60 

for FY 2016. The first option was to 

extend the new technology add-on 

payment through FY 2016. The request 

to extend the new technology add-on 

payment is addressed in section II.I.3.e. 

of the preamble of this proposed rule. 

The second option was to establish a 

new family of MS–DRGs for drugeluting stents used in the peripheral 

(noncoronary) vasculature. The third 

option was to assign all Zilver® PTX®

cases to MS–DRG 252 even if there is no 

MCC (which would necessitate revising 

the MS–DRG title to ‘‘Other Vascular 

Procedures). 

ICD–10–PCS provides the following 

more detailed procedure codes for the 

insertion of drug-eluting stents of 

superficial femoral artery: 

• 047K04Z (Dilation of right femoral 

artery with drug-eluting intraluminal 

device, open approach); 


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• 047K34Z (Dilation of right femoral 

artery with drug-eluting intraluminal 

device, percutaneous approach); 

• 047K44Z (Dilation of right femoral 

artery with drug-eluting intraluminal 

device, percutaneous endoscopic 

approach); 

• 047L04Z (Dilation of left femoral 

artery with drug-eluting intraluminal 

device, open approach); 

• 047L34Z (Dilation of left femoral 

artery with drug-eluting intraluminal 

device, percutaneous approach); and 

• 047L44Z (Dilation of left femoral 

artery with drug-eluting intraluminal 

device, percutaneous endoscopic 

approach). 

We examined claims data for the 

drug-eluting peripheral stent procedures 

cases reported in the December 2014 

update of the FY 2014 MedPAR file for 

MS–DRGs 252, 253, and 254 (Other 

Vascular Procedures with MCC, with CC 

and without CC/MCC, respectively). The 

following table illustrates our findings. 

DRUG-ELUTING PERIPHERAL STENT PROCEDURES

MS–DRGs Number of 

cases 

Average 

length of stay Average costs 

MS–DRG 252—All cases ............................................................................................................ 30,696 7.89 $23,935 

MS–DRG 252—Cases with procedure code 00.60 .................................................................... 133 9.08 32,623 

MS–DRG 253—All cases ............................................................................................................ 34,746 5.68 19,030 

MS–DRG 253—Cases with procedure code 00.60 .................................................................... 353 4.99 25,396 

MS–DRG 254—All cases ............................................................................................................ 15,394 2.99 12,629 

MS–DRG 254—Cases with procedure code 00.60 .................................................................... 115 2.62 21,461 

Our findings show that there were 

only 601 peripheral angioplasty cases 

with a drug-eluting stent reported. Of 

the 601 peripheral angioplasty cases 

with a drug-eluting stent, 133 cases 

were in MS–DRG 252, 353 cases were in 

MS–DRG 253, and 115 cases were in 

MS–DRG 254. The average costs for the 

drug-eluting stent cases in MS–DRGs 

252, 253, and 254 were $32,623, 

$25,396, and $21,461, respectively. The 

average costs for all cases in MS–DRGs 

252, 253, and 254 were $23,935, 

$19,030, and $12,629, respectively. The 

average costs for the drug-eluting stent 

cases in MS–DRG 253 ($25,396) were 

higher than the average costs for all 

cases in MS–DRG 252 ($23,935). 

However, the average costs for the drugeluting stent cases in MS–DRG 254 

($21,461) were lower than the average 

costs for all cases in MS–DRG 252 

($23,935). 

We have determined that the small 

number of cases (601) does not provide 

justification to create a new set of MS– 

DRGs specifically for angioplasty of 

peripheral arteries using drug-eluting 

stents. In addition, the data do not 

support assigning all the drug-eluting 

stent cases to the highest severity level 

(MS–DRG 252), even when there is not 

an MCC, because the average costs for 

the drug-eluting stent cases in MS–DRG 

254 ($21,461) were lower than the 

average costs for all cases in MS–DRG 

252 ($23,935). The average length of 

stay for drug-eluting stent cases in MS– 

DRG 254 was 2.62 days compared to 

7.89 days for all cases in MS–DRG 252. 

Cases are grouped together based on 

similar clinical and resource criteria. 

Our clinical advisors recommended 

making no MS–DRG updates for 

peripheral angioplasty cases with a 

drug-eluting stent and considered the 

current MS–DRG assignment 

appropriate. Our clinical advisors 

agreed that the small number of 

peripheral angioplasty cases with a 

drug-eluting stent does not support 

creating a new MS–DRG for this specific 

type of treatment. They stated that the 

cases are clinically similar to other cases 

within MS–DRGs 252, 253, and 254. 

Considering the data for peripheral 

angioplasty cases with a drug-eluting 

stent found reported in MS–DRGs 252, 

253, and 254 and the input from our 

clinical advisors, we are not proposing 

to make any MS–DRG updates for 

peripheral angioplasty cases with a 

drug-eluting stent. We are proposing to 

maintain the current MS–DRG 

assignments for these cases in MS–DRGs 

252, 253, and 254. We are inviting 

public comments on our proposal. 

d. Percutaneous Mitral Valve Repair 

System—Proposed Revision of ICD–10– 

PCS Version 32 Logic 

We received a comment which 

brought to our attention that the ICD–10 

MS–DRGs Version 32 assignment for 

ICD–10–PCS procedure code 02UG3JZ 

(Supplement mitral valve with synthetic 

substitute, percutaneous approach) does 

not accurately replicate the ICD–9–CM 

MS–DRGs Version 32, which assign this 

procedure code to the following MS– 

DRGs: 

• MS–DRG 231 (Coronary Bypass 

with PTCA with MCC); 

• MS–DRG 232 (Coronary Bypass 

with PTCA without MCC); 

• MS–DRG 246 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/ 

Stents); 

• MS DRG 247 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent without MCC); 

• MS–DRG 248 (Percutaneous 

Cardiovascular Procedure with NonDrug-Eluting Stent with MCC or 4+ 

Vessels/Stents); 

• MS DRG 249 (Percutaneous 

Cardiovascular Procedure with NonDrug-Eluting Stent without MCC); 

• MS–DRG 250 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent with MCC); and 

• MS–DRG 251 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent without MCC). 

We agree with the commenter that the 

ICD–10 MS–DRGs logic should be 

consistent with the ICD–9 MS–DRGs 

logic; that is, the ICD–10 MS–DRGs 

Version 32 should replicate the ICD–9– 

CM MS–DRGs Version 32. Therefore, for 

the proposed FY 2016 ICD–10 MS– 

DRGs Version 33, we are proposing to 

assign ICD–10–PCS procedure code 

02UG3JZ to MS–DRGs 231 and 232 and 

MS–DRGs 246 through 251. We are 

inviting public comments on this 

proposal. 

e. Major Cardiovascular Procedures: 

Zenith® Fenestrated Abdominal Aortic 

Aneurysm (AAA) Graft 

The new technology add-on payment 

for the Zenith® Fenestrated Abdominal 

Aortic Aneurysm (AAA) Graft (Zenith®

F. Graft) will end on September 30, 

2015. Cases involving the Zenith® F. 

Graft are identified by ICD–9–CM 

procedure code 39.78 (Endovascular 

implantation of branching or fenestrated 

graft(s) in aorta) in MS–DRGs 237 and 

238 (Major Cardiovascular Procedures 

with and without MCC, respectively). 

For additional information on the 

Zenith® F. Graft, we refer readers to the 


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FY 2015 IPPS/LTCH PPS final rule (79 

FR 49921 through 49922). 

We received a request to reassign 

procedure code 39.78 to the highest 

severity level in MS–DRGs 237 and 238, 

including in instances when there is not 

an MCC present, or to create a new MS– 

DRG that would contain all 

endovascular aneurysm repair 

procedures. We note that, in addition to 

procedure code 39.78, ICD–9–CM 

procedure code 39.71 (Endovascular 

implantation of other graft in abdominal 

aorta) also describes endovascular 

aneurysm repair procedures. 

There are a number of ICD–10–PCS 

code translations that provide more 

detailed and specific information for 

each of ICD–9–CM codes 39.71 and 

39.78 that also currently group to MS– 

DRGs 237 and 238 in the ICD–10 MS– 

DRGs Version 32. The comparable ICD– 

10–PCS code translations for ICD–9–CM 

procedure code 39.71 and 39.78 are 

shown in the following tables: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.71 

ICD–10–PCS code Code description 

04U03JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous approach. 

04U04JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous endoscopic approach. 

04V03DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous approach. 

04V04DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.78 

ICD–10–PCS code Code description 

04793DZ ....................... Dilation of right renal artery with intraluminal device, percutaneous approach. 

04794DZ ....................... Dilation of right renal artery with intraluminal device, percutaneous endoscopic approach. 

047A3DZ ....................... Dilation of left renal artery with intraluminal device, percutaneous approach. 

047A4DZ ....................... Dilation of left renal artery with intraluminal device, percutaneous endoscopic approach. 

04753DZ ....................... Dilation of superior mesenteric artery with intraluminal device, percutaneous approach. 

04754DZ ....................... Dilation of superior mesenteric artery with intraluminal device, percutaneous endoscopic approach. 

04V03DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous approach. 

04V04DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous endoscopic approach. 

We analyzed claims data reporting 

procedure code 39.78 for cases assigned 

to MS–DRGs 237 and 238 in the 

December 2014 update of the FY 2014 

MedPAR file. We found a total of 18,340 

cases, with an average length of stay of 

9.46 days and average costs of $36,355 

in MS–DRG 237. We found 332 cases 

reporting procedure code 39.78, with an 

average length of stay of 8.46 days and 

average costs of $51,397 in MS–DRG 

237. For MS–DRG 238, we found a total 

of 32,227 cases, with an average length 

of stay of 3.72 days and average costs of 

$25,087. We found 1,927 cases reporting 

procedure code 39.78, with an average 

length of stay of 2.52 days and average 

costs of $31,739 in MS–DRG 238. 

ZENITH FENESTRATED GRAFT PROCEDURES

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRG 237—All cases ............................................................................................................ 18,340 9.46 $36,355 

MS–DRG 237—Cases with procedure code 39.78 .................................................................... 332 8.46 51,397 

MS–DRG 238—All cases ............................................................................................................ 32,227 3.72 25,087 

MS–DRG 238—Cases with procedure code 39.78 .................................................................... 1,927 2.52 31,739

As illustrated in the table above, the 

results of the data analysis indicate that 

the average costs for cases reporting 

procedure code 39.78 assigned to MS– 

DRG 238 were higher than the average 

costs for all cases in MS–DRG 238 

($3l,739 compared to $25,087). In 

addition, the average costs for the 1,927 

cases reporting procedure code 39.78 

assigned to MS–DRG 238 were $4,616 

less than the costs of all cases assigned 

to MS–DRG 237. We determined that 

moving cases reporting procedure code 

39.78 from MS–DRG 238 to MS–DRG 

237 would result in overpayments. We 

also note that the average length of stay 

for the 1,927 cases reporting procedure 

code 39.78 in MS–DRG 238 was 2.52 

days in comparison to the average 

length of stay for all cases in MS–DRG 

237 of 9.46 days. Our clinical advisors 

do not agree with moving cases 

reporting procedure code 39.78 to a 

higher severity level (with MCC) MS– 

DRG. 

We believe that the higher average 

costs could be attributed to the cost of 

the device. The Zenith® F. Graft is the 

only fenestrated graft device currently 

approved by the FDA. Therefore, this 

manufacturer is able to set its own costs 

in the market. We point out that the 

IPPS is not designed to pay solely for 

the cost of devices. More importantly, 

moving cases that greatly differ in their 

severity of illness and complexity of 

resources into a higher severity level 

MS–DRG, in the absence of an MCC, 

would conflict with the objective of the 

MS–DRGs, which is to maintain 

homogeneous subgroups that are 

different from one another in terms of 

utilization of resources, that have 

enough volume to be meaningful, and 

that improve our ability to explain 

variance in resource use (72 FR 47169). 

Therefore, we are not proposing to 

reassign all cases reporting procedure 

code 39.78 from MS–DRG 238 to MS– 

DRG 237, as the commenter requested. 

However, we recognize that the 

results of the data analysis also 

demonstrated that the average costs for 

cases reporting procedure code 39.78 

are higher in both MS–DRG 237 and 

MS–DRG 238 in comparison to all cases 

in each respective MS–DRG. As these 


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higher average costs could be 

attributable to the cost of the device, we 

note the commenter’s concern that the 

end of the new technology add-on 

payment for Zenith® F. Graft, effective 

September 30, 2015, may result in 

reduced payment to hospitals and 

potentially lead to issues involving 

access to care for the subset of 

beneficiaries who would benefit from 

treatment with the Zenith® F. Graft. We 

continued to review the data to explore 

other alternatives as we analyzed 

additional claims data in response to the 

second part of the request from the 

commenter; that is, to create a new MS– 

DRG that would contain all 

endovascular aneurysm repair 

procedures. 

In our evaluation of the claims data in 

response to the request to create a new 

MS–DRG, we again reviewed claims 

data from the December 2014 update of 

the FY 2014 MedPAR file. We began our 

analysis by examining claims data for 

cases reporting procedure codes 39.71 

and 39.78 assigned to MS–DRGs 237 

and 238. Our findings are shown in the 

table below. 

ENDOVASCULAR ABDOMINAL AORTA PROCEDURES

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRG 237—All cases ............................................................................................................ 18,340 9.46 $36,355 

MS–DRG 237—Cases with procedure codes 39.71 and 39.78 ................................................. 2,425 8.34 47,363 

MS–DRG 238—All cases ............................................................................................................ 32,227 3.72 25,087 

MS–DRG 238—Cases with procedure codes 39.71 and 39.78 ................................................. 16,502 2.27 28,998 

As shown in the table above, the 

average costs for endovascular 

abdominal aorta aneurysm repair 

procedures assigned to MS–DRG 237 

were higher than the average costs of all 

cases assigned to MS–DRGs 237. The 

average costs for cases reporting 

procedure codes 39.71 and 39.78 

assigned to MS–DRG 237 were $47,363 

compared to the average costs of 

$36,355 for all cases assigned to MS– 

DRG 237 and $25,087 for all cases 

assigned to MS–DRG 238. Similarly, the 

average costs for cases reporting 

procedure codes 39.71 and 39.78 

assigned to MS–DRG 238 were higher 

than the average costs of all cases 

assigned to MS–DRG 238 ($28,998 

compared to $25,087). The average 

length of stay for cases reporting 

procedure codes 39.71 and 39.78 in 

MS–DRGs 237 and 238 were also shorter 

than the average length of stay for all 

cases in the respective MS–DRG. 

Our clinical advisors did not support 

creating a new MS–DRG specifically for 

endovascular abdominal aortic 

aneurysm repair procedures only. 

Therefore, we reviewed other procedure 

codes currently assigned to MS–DRGs 

237 and 238 and found that there were 

a number of procedures with varying 

resource requirements and clinical 

indications that could be analyzed 

further. We agreed with our clinical 

advisors that further analysis was 

warranted to determine how we could 

better recognize resource utilization, 

clinical complexity, and average costs 

by separating the more complex, more 

invasive, and more expensive 

procedures used to treat more severely 

ill individuals from the less complex, 

less invasive, and less expensive 

procedures currently grouped to these 

MS–DRGs. 

Therefore, we evaluated all of the 

procedures currently assigned to MS– 

DRGs 237 and 238. In our evaluation, 

we found that MS–DRGs 237 and 238 

contained two distinct groups of 

procedures. We found a high volume of 

less invasive procedures, such as 

pericardiotomies and pulsation balloon 

implants, that had substantially lower 

costs than the more invasive 

procedures, such as open and 

endovascular repairs of the aorta with 

replacement grafts. We found that the 

more invasive procedures were 

primarily associated with procedures on 

the aorta and heart assist procedures. 

For this next phase of our analysis, 

the following procedure codes were 

designated as the more complex, more 

invasive procedures: 

• 37.41 (Implantation of prosthetic 

cardiac support device around the 

heart); 

• 37.49 (Other repair of heart and 

pericardium); 

• 37.55 (Removal of internal 

biventricular heart replacement system); 

• 37.64 (Removal of external heart 

assist system(s) or device(s)); 

• 38.04 (Incision of vessel, aorta); 

• 38.14 (Endarterectomy, aorta); 

• 38.34 (Resection of vessel with 

anastomosis, aorta); 

• 38.44 (Resection of vessel with 

replacement, aorta, abdominal); 

• 38.64 (Other excision of vessels, 

aorta, abdominal); 

• 38.84 (Other surgical occlusion of 

vessels, aorta, abdominal); 

• 39.24 (Aorta-renal bypass); 

• 39.71 (Endovascular implantation 

of other graft in abdominal aorta); and 

• 39.78 (Endovascular implantation 

of branching or fenestrated graft(s) in 

aorta). 

There are a number of ICD–10–PCS 

code translations that provide more 

detailed and specific information for 

each of the ICD–9–CM codes listed 

above that also currently group to MS– 

DRGs 237 and 238 in the ICD–10 MS– 

DRGs Version 32. The comparable ICD– 

10–PCS code translations for these ICD– 

9–CM procedure codes are shown in the 

following table: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.41 

ICD–10–PCS 

code Code description 

02UA0JZ ....................... Supplement heart with synthetic substitute, open approach. 

02UA3JZ ....................... Supplement heart with synthetic substitute, percutaneous approach. 

02UA4JZ ....................... Supplement heart with synthetic substitute, percutaneous endoscopic approach. 

For the ICD–9–CM codes that result in 

greater than 50 ICD–10–PCS comparable 

code translations, we refer readers to 

Table 6P (ICD–10–PCS Code 

Translations for Proposed MS–DRG 

Changes) for this proposed rule (which 


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is available via the Internet on the CMS 

Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/

index.html. The table includes the MDC 

topic, the ICD–9–CM code, and the ICD– 

10–PCS code translations. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.49 

ICD–10–PCS 

code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 37.49 are shown in Table 6P.1a that is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.55 

ICD–10–PCS 

code Code description 

02PA0QZ ...................... Removal of implantable heart assist system from heart, open approach. 

02PA3QZ ...................... Removal of implantable heart assist system from heart, percutaneous approach. 

02PA4QZ ...................... Removal of implantable heart assist system from heart, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.64 

ICD–10–PCS 

code Code description 

02PA0RZ ...................... Removal of external heart assist system from heart, open approach. 

02PA3RZ ...................... Removal of external heart assist system from heart, percutaneous approach. 

02PA4RZ ...................... Removal of external heart assist system from heart, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.04 

ICD–10–PCS 

code Code description 

02CW0ZZ ..................... Extirpation of matter from thoracic aorta, open approach. 

02CW3ZZ ..................... Extirpation of matter from thoracic aorta, percutaneous approach. 

02CW4ZZ ..................... Extirpation of matter from thoracic aorta, percutaneous endoscopic approach. 

04C00ZZ ....................... Extirpation of matter from abdominal aorta, open approach. 

04C03ZZ ....................... Extirpation of matter from abdominal aorta, percutaneous approach. 

04C04ZZ ....................... Extirpation of matter from abdominal aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.14 

ICD–10–PCS 

code Code description 

02CW0ZZ ..................... Extirpation of matter from thoracic aorta, open approach. 

02CW3ZZ ..................... Extirpation of matter from thoracic aorta, percutaneous approach. 

02CW4ZZ ..................... Extirpation of matter from thoracic aorta, percutaneous endoscopic approach. 

04C00ZZ ....................... Extirpation of matter from abdominal aorta, open approach. 

04C03ZZ ....................... Extirpation of matter from abdominal aorta, percutaneous approach. 

04C04ZZ ....................... Extirpation of matter from abdominal aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.34 

ICD–10–PCS 

code Code description 

02BW0ZZ ...................... Excision of thoracic aorta, open approach. 

02BW4ZZ ...................... Excision of thoracic aorta, percutaneous endoscopic approach. 

04B00ZZ ....................... Excision of abdominal aorta, open approach. 

04B04ZZ ....................... Excision of abdominal aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.44 

ICD–10–PCS 

code Code description 

04R007Z ....................... Replacement of abdominal aorta with autologous tissue substitute, open approach. 

04R00JZ ....................... Replacement of abdominal aorta with synthetic substitute, open approach. 


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ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.44—Continued 

ICD–10–PCS 

code Code description 

04R00KZ ....................... Replacement of abdominal aorta with nonautologous tissue substitute, open approach. 

04R047Z ....................... Replacement of abdominal aorta with autologous tissue substitute, percutaneous endoscopic approach. 

04R04JZ ....................... Replacement of abdominal aorta with synthetic substitute, percutaneous endoscopic approach. 

04R04KZ ....................... Replacement of abdominal aorta with nonautologous tissue substitute, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.64 

ICD–10–PCS 

code Code description 

04500ZZ ....................... Destruction of abdominal aorta, open approach. 

04503ZZ ....................... Destruction of abdominal aorta, percutaneous approach. 

04504ZZ ....................... Destruction of abdominal aorta, percutaneous endoscopic approach. 

04B00ZZ ....................... Excision of abdominal aorta, open approach. 

04B03ZZ ....................... Excision of abdominal aorta, percutaneous approach. 

04B04ZZ ....................... Excision of abdominal aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.84 

ICD–10–PCS 

code Code description 

04L00CZ ....................... Occlusion of abdominal aorta with extraluminal device, open approach. 

04L00DZ ....................... Occlusion of abdominal aorta with intraluminal device, open approach. 

04L00ZZ ....................... Occlusion of abdominal aorta, open approach. 

04L03CZ ....................... Occlusion of abdominal aorta with extraluminal device, percutaneous approach. 

04L03DZ ....................... Occlusion of abdominal aorta with intraluminal device, percutaneous approach. 

04L03ZZ ....................... Occlusion of abdominal aorta, percutaneous approach. 

04L04CZ ....................... Occlusion of abdominal aorta with extraluminal device, percutaneous endoscopic approach. 

04L04DZ ....................... Occlusion of abdominal aorta with intraluminal device, percutaneous endoscopic approach. 

04L04ZZ ....................... Occlusion of abdominal aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.24 

ICD–10–PCS 

code Code description 

0410093 ........................ Bypass abdominal aorta to right renal artery with autologous venous tissue, open approach. 

0410094 ........................ Bypass abdominal aorta to left renal artery with autologous venous tissue, open approach. 

0410095 ........................ Bypass abdominal aorta to bilateral renal artery with autologous venous tissue, open approach. 

04100A3 ....................... Bypass abdominal aorta to right renal artery with autologous arterial tissue, open approach. 

04100A4 ....................... Bypass abdominal aorta to left renal artery with autologous arterial tissue, open approach. 

04100A5 ....................... Bypass abdominal aorta to bilateral renal artery with autologous arterial tissue, open approach. 

04100J3 ........................ Bypass abdominal aorta to right renal artery with synthetic substitute, open approach. 

04100J4 ........................ Bypass abdominal aorta to left renal artery with synthetic substitute, open approach. 

04100J5 ........................ Bypass abdominal aorta to bilateral renal artery with synthetic substitute, open approach. 

04100K3 ....................... Bypass abdominal aorta to right renal artery with nonautologous tissue substitute, open approach.

04100K4 ....................... Bypass abdominal aorta to left renal artery with nonautologous tissue substitute, open approach. 

04100K5 ....................... Bypass abdominal aorta to bilateral renal artery with nonautologous tissue substitute, open approach. 

04100Z3 ........................ Bypass abdominal aorta to right renal artery, open approach. 

04100Z4 ........................ Bypass abdominal aorta to left renal artery, open approach. 

04100Z5 ........................ Bypass abdominal aorta to bilateral renal artery, open approach. 

0410493 ........................ Bypass abdominal aorta to right renal artery with autologous venous tissue, percutaneous endoscopic approach. 

0410494 ........................ Bypass abdominal aorta to left renal artery with autologous venous tissue, percutaneous endoscopic approach. 

0410495 ........................ Bypass abdominal aorta to bilateral renal artery with autologous venous tissue, percutaneous endoscopic approach. 

04104A3 ....................... Bypass abdominal aorta to right renal artery with autologous arterial tissue, percutaneous endoscopic approach. 

04104A4 ....................... Bypass abdominal aorta to left renal artery with autologous arterial tissue, percutaneous endoscopic approach. 

04104A5 ....................... Bypass abdominal aorta to bilateral renal artery with autologous arterial tissue, percutaneous endoscopic approach. 

04104J3 ........................ Bypass abdominal aorta to right renal artery with synthetic substitute, percutaneous endoscopic approach. 

04104J4 ........................ Bypass abdominal aorta to left renal artery with synthetic substitute, percutaneous endoscopic approach. 

04104J5 ........................ Bypass abdominal aorta to bilateral renal artery with synthetic substitute, percutaneous endoscopic approach. 

04104K3 ....................... Bypass abdominal aorta to right renal artery with nonautologous tissue substitute, percutaneous endoscopic approach. 

04104K4 ....................... Bypass abdominal aorta to left renal artery with nonautologous tissue substitute, percutaneous endoscopic approach. 

04104K5 ....................... Bypass abdominal aorta to bilateral renal artery with nonautologous tissue substitute, percutaneous endoscopic approach. 

04104Z3 ........................ Bypass abdominal aorta to right renal artery, percutaneous endoscopic approach. 

04104Z4 ........................ Bypass abdominal aorta to left renal artery, percutaneous endoscopic approach. 

04104Z5 ........................ Bypass abdominal aorta to bilateral renal artery, percutaneous endoscopic approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24367 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.71 

ICD–10–PCS 

code Code description 

04U03JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous approach. 

04U04JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous endoscopic approach. 

04V03DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous approach. 

04V04DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.78 

ICD–10–PCS 

code Code description 

04793DZ ....................... Dilation of right renal artery with intraluminal device, percutaneous approach. 

04794DZ ....................... Dilation of right renal artery with intraluminal device, percutaneous endoscopic approach. 

047A3DZ ....................... Dilation of left renal artery with intraluminal device, percutaneous approach. 

047A4DZ ....................... Dilation of left renal artery with intraluminal device, percutaneous endoscopic approach. 

04753DZ ....................... Dilation of superior mesenteric artery with intraluminal device, percutaneous approach. 

04754DZ ....................... Dilation of superior mesenteric artery with intraluminal device, percutaneous endoscopic approach. 

04U03JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous approach. 

04U04JZ ....................... Supplement abdominal aorta with synthetic substitute, percutaneous endoscopic approach. 

04V03DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous approach. 

04V04DZ ....................... Restriction of abdominal aorta with intraluminal device, percutaneous endoscopic approach. 

For the next phase of our analysis, the 

procedure codes shown in the following 

table were designated as the less 

complex, less invasive procedures. 

ICD–9–CM PROCEDURE CODES THAT WERE DESIGNATED AS THE LESS COMPLEX, LESS INVASIVE PROCEDURES

ICD–9–CM 

procedure code Code description 

35.00 ............................. Closed heart valvotomy, unspecified valve. 

35.01 ............................. Closed heart valvotomy, aortic valve. 

35.02 ............................. Closed heart valvotomy, mitral valve. 

35.03 ............................. Closed heart valvotomy, pulmonary valve. 

35.04 ............................. Closed heart valvotomy, tricuspid valve. 

37.12 ............................. Pericardiotomy. 

37.24 ............................. Biopsy of pericardium. 

37.31 ............................. Pericardiectomy. 

37.61 ............................. Implant of pulsation balloon. 

37.67 ............................. Implantation of cardiomyostimulation system. 

37.91 ............................. Open chest cardiac massage. 

37.99 ............................. Other operations on heart and pericardium. 

38.05 ............................. Incision of vessel, other thoracic vessels. 

38.06 ............................. Incision of vessel, abdominal arteries. 

38.07 ............................. Incision of vessel, abdominal veins. 

38.15 ............................. Endarterectomy, other thoracic vessels. 

38.16 ............................. Endarterectomy, abdominal arteries. 

38.35 ............................. Resection of vessel with anastomosis, other thoracic vessels. 

38.36 ............................. Resection of vessel with anastomosis, abdominal arteries. 

38.37 ............................. Resection of vessel with anastomosis, abdominal veins. 

38.46 ............................. Resection of vessel with replacement, abdominal arteries. 

38.47 ............................. Resection of vessel with replacement, abdominal veins. 

38.55 ............................. Ligation and stripping of varicose veins, other thoracic vessels. 

38.65 ............................. Other excision of vessels, thoracic vessels. 

38.66 ............................. Other excision of vessels, abdominal arteries. 

38.67 ............................. Other excision of vessels, abdominal veins. 

38.85 ............................. Other surgical occlusion of vessels, thoracic vessels. 

38.86 ............................. Other surgical occlusion of vessels, abdominal arteries. 

38.87 ............................. Other surgical occlusion of vessels, abdominal veins. 

39.0 ............................... Systemic to pulmonary artery shunt. 

39.1 ............................... Intra-abdominal venous shunt. 

39.21 ............................. Caval-pulmonary artery anastomosis. 

39.22 ............................. Aorta-subclavian-carotid bypass. 

39.23 ............................. Other intrathoracic vascular shunt or bypass. 

39.25 ............................. Aorta-iliac-femoral bypass. 

39.26 ............................. Other intra-abdominal vascular shunt or bypass. 

39.52 ............................. Other repair of aneurysm. 

39.54 ............................. Re-entry operation (aorta). 

39.72 ............................. Endovascular (total) embolization or occlusion of head and neck vessels. 

39.75 ............................. Endovascular embolization or occlusion of vessel(s) of head or neck using bare coils. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24368 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–9–CM PROCEDURE CODES THAT WERE DESIGNATED AS THE LESS COMPLEX, LESS INVASIVE PROCEDURES— 

Continued 

ICD–9–CM 

procedure code Code description 

39.76 ............................. Endovascular embolization or occlusion of vessel(s) of head or neck using bioactive coils. 

39.79 ............................. Other endovascular procedures on other vessels. 

There are a number of ICD–10–PCS 

code translations that provide more 

detailed and specific information for 

each of the ICD–9–CM codes listed in 

the table immediately above that also 

currently group to MS–DRGs 237 and 

238 in the ICD–10 MS–DRGs Version 

32. The comparable ICD–10–PCS code 

translations for these ICD–9–CM 

procedure codes are shown in the 

following tables: 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.00 

ICD–10–PCS code Code description 

02NF3ZZ ....................... Release aortic valve, percutaneous approach. 

02NF4ZZ ....................... Release aortic valve, percutaneous endoscopic approach. 

02NG3ZZ ...................... Release mitral valve, percutaneous approach. 

02NG4ZZ ...................... Release mitral valve, percutaneous endoscopic approach. 

02NH3ZZ ...................... Release pulmonary valve, percutaneous approach. 

02NH4ZZ ...................... Release pulmonary valve, percutaneous endoscopic approach. 

02NJ3ZZ ....................... Release tricuspid valve, percutaneous approach. 

02NJ4ZZ ....................... Release tricuspid valve, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.01 

ICD–10–PCS code Code description 

02CF3ZZ ....................... Extirpation of matter from aortic valve, percutaneous approach. 

02CF4ZZ ....................... Extirpation of matter from aortic valve, percutaneous endoscopic approach. 

02NF3ZZ ....................... Release aortic valve, percutaneous approach. 

02NF4ZZ ....................... Release aortic valve, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATION FOR ICD–9–CM PROCEDURE CODE 35.02 

ICD–10–PCS code Code description 

02CG3ZZ ...................... Extirpation of matter from mitral valve, percutaneous approach. 

02CG4ZZ ...................... Extirpation of matter from mitral valve, percutaneous endoscopic approach. 

02NG3ZZ ...................... Release mitral valve, percutaneous approach. 

02NG4ZZ ...................... Release mitral valve, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.03 

ICD–10–PCS code Code description 

02CH3ZZ ...................... Extirpation of matter from pulmonary valve, percutaneous approach. 

02CH4ZZ ...................... Extirpation of matter from pulmonary valve, percutaneous endoscopic approach. 

02NH3ZZ ...................... Release Pulmonary Valve, Percutaneous Approach. 

02NH4ZZ ...................... Release Pulmonary Valve, Percutaneous Endoscopic Approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 35.04 

ICD–10–PCS code Description 

02CJ3ZZ ....................... Extirpation of matter from tricuspid valve, percutaneous approach. 

02CJ4ZZ ....................... Extirpation of matter from tricuspid valve, percutaneous endoscopic approach. 

02NJ3ZZ ....................... Release tricuspid valve, percutaneous approach. 

02NJ4ZZ ....................... Release tricuspid valve, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.12 

ICD–10–PCS code Code description 

02CN0ZZ ...................... Extirpation of matter from pericardium, open approach. 

02CN3ZZ ...................... Extirpation of matter from pericardium, percutaneous approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24369 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.12—Continued 

ICD–10–PCS code Code description 

02CN4ZZ ...................... Extirpation of matter from pericardium, percutaneous endoscopic approach. 

02HN00Z ...................... Insertion of pressure sensor monitoring device into pericardium, open approach. 

02HN02Z ...................... Insertion of monitoring device into pericardium, open approach. 

02HN30Z ...................... Insertion of pressure sensor monitoring device into pericardium, percutaneous approach. 

02HN32Z ...................... Insertion of monitoring device into pericardium, percutaneous approach. 

02HN40Z ...................... Insertion of pressure sensor monitoring device into pericardium, percutaneous endoscopic approach.

02HN42Z ...................... Insertion of monitoring device into pericardium, percutaneous endoscopic approach. 

02NN0ZZ ...................... Release pericardium, open approach. 

02NN3ZZ ...................... Release pericardium, percutaneous approach. 

02NN4ZZ ...................... Release pericardium, percutaneous endoscopic approach. 

0W9D00Z ...................... Drainage of pericardial cavity with drainage device, open approach. 

0W9D0ZX ..................... Drainage of pericardial cavity, open approach, diagnostic. 

0W9D0ZZ ..................... Drainage of pericardial cavity, open approach. 

0WCD0ZZ ..................... Extirpation of matter from pericardial cavity, open approach. 

0WCD3ZZ ..................... Extirpation of matter from pericardial cavity, percutaneous approach. 

0WCD4ZZ ..................... Extirpation of matter from pericardial cavity, percutaneous endoscopic approach. 

0WHD03Z ..................... Insertion of infusion device into pericardial cavity, open approach. 

0WHD0YZ ..................... Insertion of other device into pericardial cavity, open approach. 

0WHD33Z ..................... Insertion of infusion device into pericardial cavity, percutaneous approach. 

0WHD3YZ ..................... Insertion of other device into pericardial cavity, percutaneous approach. 

0WHD43Z ..................... Insertion of infusion device into pericardial cavity, percutaneous endoscopic approach. 

0WHD4YZ ..................... Insertion of other device into pericardial cavity, percutaneous endoscopic approach. 

0WPD00Z ..................... Removal of drainage device from pericardial cavity, open approach. 

0WPD01Z ..................... Removal of radioactive element from pericardial cavity, open approach. 

0WPD03Z ..................... Removal of infusion device from pericardial cavity, open approach. 

0WPD0YZ ..................... Removal of other device from pericardial cavity, open approach. 

0WPD30Z ..................... Removal of drainage device from pericardial cavity, percutaneous approach. 

0WPD31Z ..................... Removal of radioactive element from pericardial cavity, percutaneous approach. 

0WPD33Z ..................... Removal of infusion device from pericardial cavity, percutaneous approach. 

0WPD3YZ ..................... Removal of other device from pericardial cavity, percutaneous approach. 

0WPD40Z ..................... Removal of drainage device from pericardial cavity, percutaneous endoscopic approach. 

0WPD41Z ..................... Removal of radioactive element from pericardial cavity, percutaneous endoscopic approach. 

0WPD43Z ..................... Removal of infusion device from pericardial cavity, percutaneous endoscopic approach. 

0WPD4YZ ..................... Removal of other device from pericardial cavity, percutaneous endoscopic approach. 

0WWD00Z .................... Revision of drainage device in pericardial cavity, open approach. 

0WWD01Z .................... Revision of radioactive element in pericardial cavity, open approach. 

0WWD03Z .................... Revision of infusion device in pericardial cavity, open approach. 

0WWD0YZ .................... Revision of other device in pericardial cavity, open approach. 

0WWD30Z .................... Revision of drainage device in pericardial cavity, percutaneous approach. 

0WWD31Z .................... Revision of radioactive element in pericardial cavity, percutaneous approach. 

0WWD33Z .................... Revision of infusion device in pericardial cavity, percutaneous approach. 

0WWD3YZ .................... Revision of other device in pericardial cavity, percutaneous approach. 

0WWD40Z .................... Revision of drainage device in pericardial cavity, percutaneous endoscopic approach. 

0WWD41Z .................... Revision of radioactive element in pericardial cavity, percutaneous endoscopic approach. 

0WWD43Z .................... Revision of infusion device in pericardial cavity, percutaneous endoscopic approach. 

0WWD4YZ .................... Revision of other device in pericardial cavity, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.24 

ICD–10–PCS code Code description 

02BN0ZX ...................... Excision of pericardium, open approach, diagnostic 

02BN3ZX ...................... Excision of pericardium, percutaneous approach, diagnostic 

02BN4ZX ...................... Excision of pericardium, percutaneous endoscopic approach, diagnostic 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.31 

ICD–10–PCS code Code description 

025N0ZZ ....................... Destruction of pericardium, open approach. 

025N3ZZ ....................... Destruction of pericardium, percutaneous approach. 

025N4ZZ ....................... Destruction of pericardium, percutaneous endoscopic approach. 

02BN0ZZ ...................... Excision of pericardium, open approach. 

02BN3ZZ ...................... Excision of pericardium, percutaneous approach. 

02BN4ZZ ...................... Excision of pericardium, percutaneous endoscopic approach. 

02TN0ZZ ....................... Resection of pericardium, open approach. 

02TN3ZZ ....................... Resection of pericardium, percutaneous approach. 

02TN4ZZ ....................... Resection of pericardium, percutaneous endoscopic approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24370 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.61 

ICD–10–PCS code Code description 

5A02110 ....................... Assistance with cardiac output using balloon pump, intermittent. 

5A02210 ....................... Assistance with cardiac output using balloon pump, continuous. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.67 

ICD–10–PCS code Code description 

02QA0ZZ ...................... Repair heart, open approach. 

02QA3ZZ ...................... Repair heart, percutaneous approach. 

02QA4ZZ ...................... Repair heart, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.91 

ICD–10–PCS code Code description 

02QA0ZZ ...................... Repair heart, open approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 37.99 

ICD–10–PCS code Code description 

02880ZZ ....................... Division of conduction mechanism, open approach. 

02883ZZ ....................... Division of conduction mechanism, percutaneous approach. 

02884ZZ ....................... Division of conduction mechanism, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.05 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.05 are shown in Table 6P.1b for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.06 

ICD–10–PCS code Code description 

04C10ZZ ....................... Extirpation of matter from celiac artery, open approach. 

04C13ZZ ....................... Extirpation of matter from celiac artery, percutaneous approach. 

04C14ZZ ....................... Extirpation of matter from celiac artery, percutaneous endoscopic approach. 

04C20ZZ ....................... Extirpation of matter from gastric artery, open approach. 

04C23ZZ ....................... Extirpation of matter from gastric artery, percutaneous approach. 

04C24ZZ ....................... Extirpation of matter from gastric artery, percutaneous endoscopic approach. 

04C30ZZ ....................... Extirpation of matter from hepatic artery, open approach. 

04C33ZZ ....................... Extirpation of matter from hepatic artery, percutaneous approach. 

04C34ZZ ....................... Extirpation of matter from hepatic artery, percutaneous endoscopic approach. 

04C40ZZ ....................... Extirpation of matter from splenic artery, open approach. 

04C43ZZ ....................... Extirpation of matter from splenic artery, percutaneous approach. 

04C44ZZ ....................... Extirpation of matter from splenic artery, percutaneous endoscopic approach. 

04C50ZZ ....................... Extirpation of matter from superior mesenteric artery, open approach. 

04C53ZZ ....................... Extirpation of matter from superior mesenteric artery, percutaneous approach. 

04C54ZZ ....................... Extirpation of matter from superior mesenteric artery, percutaneous endoscopic approach. 

04C60ZZ ....................... Extirpation of matter from right colic artery, open approach. 

04C63ZZ ....................... Extirpation of matter from right colic artery, percutaneous approach. 

04C64ZZ ....................... Extirpation of matter from right colic artery, percutaneous endoscopic approach. 

04C70ZZ ....................... Extirpation of matter from left colic artery, open approach. 

04C73ZZ ....................... Extirpation of matter from left colic artery, percutaneous approach. 

04C74ZZ ....................... Extirpation of matter from left colic artery, percutaneous endoscopic approach. 

04C80ZZ ....................... Extirpation of matter from middle colic artery, open approach. 

04C83ZZ ....................... Extirpation of matter from middle colic artery, percutaneous approach. 

04C84ZZ ....................... Extirpation of matter from middle colic artery, percutaneous endoscopic approach. 

04C90ZZ ....................... Extirpation of matter from right renal artery, open approach. 

04C93ZZ ....................... Extirpation of matter from right renal artery, percutaneous approach. 

04C94ZZ ....................... Extirpation of matter from right renal artery, percutaneous endoscopic approach. 

04CA0ZZ ...................... Extirpation of matter from left renal artery, open approach. 

04CA3ZZ ...................... Extirpation of matter from left renal artery, percutaneous approach. 

04CA4ZZ ...................... Extirpation of matter from left renal artery, percutaneous endoscopic approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24371 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.06—Continued 

ICD–10–PCS code Code description 

04CB0ZZ ...................... Extirpation of matter from inferior mesenteric artery, open approach. 

04CB3ZZ ...................... Extirpation of matter from inferior mesenteric artery, percutaneous approach. 

04CB4ZZ ...................... Extirpation of matter from inferior mesenteric artery, percutaneous endoscopic approach. 

04CC0ZZ ...................... Extirpation of matter from right common iliac artery, open approach. 

04CC3ZZ ...................... Extirpation of matter from right common iliac artery, percutaneous approach. 

04CC4ZZ ...................... Extirpation of matter from right common iliac artery, percutaneous endoscopic approach. 

04CD0ZZ ...................... Extirpation of matter from left common iliac artery, open approach. 

04CD3ZZ ...................... Extirpation of matter from left common iliac artery, percutaneous approach. 

04CD4ZZ ...................... Extirpation of matter from left common iliac artery, percutaneous endoscopic approach. 

04CE0ZZ ...................... Extirpation of matter from right internal iliac artery, open approach. 

04CE3ZZ ...................... Extirpation of matter from right internal iliac artery, percutaneous approach. 

04CE4ZZ ...................... Extirpation of matter from right internal iliac artery, percutaneous endoscopic approach. 

04CF0ZZ ....................... Extirpation of matter from left internal iliac artery, open approach. 

04CF3ZZ ....................... Extirpation of matter from left internal iliac artery, percutaneous approach. 

04CF4ZZ ....................... Extirpation of matter from left internal iliac artery, percutaneous endoscopic approach. 

04CH0ZZ ...................... Extirpation of matter from right external iliac artery, open approach. 

04CH3ZZ ...................... Extirpation of matter from right external iliac artery, percutaneous approach. 

04CH4ZZ ...................... Extirpation of matter from right external iliac artery, percutaneous endoscopic approach. 

04CJ0ZZ ....................... Extirpation of matter from left external iliac artery, open approach. 

04CJ3ZZ ....................... Extirpation of matter from left external iliac artery, percutaneous approach. 

04CJ4ZZ ....................... Extirpation of matter from left external iliac artery, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.07 

ICD–10–PCS code Code description 

06C00ZZ ....................... Extirpation of matter from inferior vena cava, open approach. 

06C03ZZ ....................... Extirpation of matter from inferior vena cava, percutaneous approach. 

06C04ZZ ....................... Extirpation of matter from inferior vena vava, percutaneous endoscopic approach. 

06C10ZZ ....................... Extirpation of matter from splenic vein, open approach. 

06C13ZZ ....................... Extirpation of matter from splenic vein, percutaneous approach. 

06C14ZZ ....................... Extirpation of matter from splenic vein, percutaneous endoscopic approach. 

06C20ZZ ....................... Extirpation of matter from gastric vein, open approach. 

06C23ZZ ....................... Extirpation of matter from gastric vein, percutaneous approach. 

06C24ZZ ....................... Extirpation of matter from gastric vein, percutaneous endoscopic approach. 

06C40ZZ ....................... Extirpation of matter from hepatic vein, open approach. 

06C43ZZ ....................... Extirpation of matter from hepatic vein, percutaneous approach. 

06C44ZZ ....................... Extirpation of matter from hepatic vein, percutaneous endoscopic approach. 

06C50ZZ ....................... Extirpation of matter from superior mesenteric vein, open approach. 

06C53ZZ ....................... Extirpation of matter from superior mesenteric vein, percutaneous approach. 

06C54ZZ ....................... Extirpation of matter from superior mesenteric vein, percutaneous endoscopic approach. 

06C60ZZ ....................... Extirpation of matter from inferior mesenteric vein, open approach. 

06C63ZZ ....................... Extirpation of matter from inferior mesenteric vein, percutaneous approach. 

06C64ZZ ....................... Extirpation of matter from inferior mesenteric vein, percutaneous endoscopic approach. 

06C70ZZ ....................... Extirpation of matter from colic vein, open approach. 

06C73ZZ ....................... Extirpation of matter from colic vein, percutaneous approach. 

06C74ZZ ....................... Extirpation of matter from colic vein, percutaneous endoscopic approach. 

06C80ZZ ....................... Extirpation of matter from portal vein, open approach. 

06C83ZZ ....................... Extirpation of matter from portal vein, percutaneous approach. 

06C84ZZ ....................... Extirpation of matter from portal vein, percutaneous endoscopic approach. 

06C90ZZ ....................... Extirpation of matter from right renal vein, open approach. 

06C93ZZ ....................... Extirpation of matter from right renal vein, percutaneous approach. 

06C94ZZ ....................... Extirpation of matter from right renal vein, percutaneous endoscopic approach. 

06CB0ZZ ...................... Extirpation of matter from left renal vein, open approach. 

06CB3ZZ ...................... Extirpation of matter from left renal vein, percutaneous approach. 

06CB4ZZ ...................... Extirpation of matter from left renal vein, percutaneous endoscopic approach. 

06CC0ZZ ...................... Extirpation of matter from right common iliac vein, open approach. 

06CC3ZZ ...................... Extirpation of matter from right common iliac vein, percutaneous approach. 

06CC4ZZ ...................... Extirpation of matter from right common iliac vein, percutaneous endoscopic approach. 

06CD0ZZ ...................... Extirpation of matter from left common iliac vein, open approach. 

06CD3ZZ ...................... Extirpation of matter from left common iliac vein, percutaneous approach. 

06CD4ZZ ...................... Extirpation of matter from left common iliac vein, percutaneous endoscopic approach. 

06CF0ZZ ....................... Extirpation of matter from right external iliac vein, open approach. 

06CF3ZZ ....................... Extirpation of matter from right external iliac vein, percutaneous approach. 

06CF4ZZ ....................... Extirpation of matter from right external iliac vein, percutaneous endoscopic approach. 

06CG0ZZ ...................... Extirpation of matter from left external iliac vein, open approach. 

06CG3ZZ ...................... Extirpation of matter from left external iliac vein, percutaneous approach. 

06CG4ZZ ...................... Extirpation of matter from left external iliac vein, percutaneous endoscopic approach. 

06CH0ZZ ...................... Extirpation of matter from right hypogastric vein, open approach. 

06CH3ZZ ...................... Extirpation of matter from right hypogastric vein, percutaneous approach. 

06CH4ZZ ...................... Extirpation of matter from right hypogastric vein, percutaneous endoscopic approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24372 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.07—Continued 

ICD–10–PCS code Code description 

06CJ0ZZ ....................... Extirpation of matter from left hypogastric vein, open approach. 

06CJ3ZZ ....................... Extirpation of matter from left hypogastric vein, percutaneous approach. 

06CJ4ZZ ....................... Extirpation of matter from left hypogastric vein, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.15 

ICD–10–PCS code Code description 

02CP0ZZ ...................... Extirpation of matter from pulmonary trunk, open approach. 

02CP3ZZ ...................... Extirpation of matter from pulmonary trunk, percutaneous approach. 

02CP4ZZ ...................... Extirpation of matter from pulmonary trunk, percutaneous endoscopic approach. 

02CQ0ZZ ...................... Extirpation of matter from right pulmonary artery, open approach. 

02CQ3ZZ ...................... Extirpation of matter from right pulmonary artery, percutaneous approach. 

02CQ4ZZ ...................... Extirpation of matter from right pulmonary artery, percutaneous endoscopic approach. 

02CR0ZZ ...................... Extirpation of matter from left pulmonary artery, open approach. 

02CR3ZZ ...................... Extirpation of matter from left pulmonary artery, percutaneous approach. 

02CR4ZZ ...................... Extirpation of matter from left pulmonary artery, percutaneous endoscopic approach. 

02CS0ZZ ...................... Extirpation of matter from right pulmonary vein, open approach. 

02CS3ZZ ...................... Extirpation of matter from right pulmonary vein, percutaneous approach. 

02CS4ZZ ...................... Extirpation of matter from right pulmonary vein, percutaneous endoscopic approach. 

02CT0ZZ ....................... Extirpation of matter from left pulmonary vein, open approach. 

02CT3ZZ ....................... Extirpation of matter from left pulmonary vein, percutaneous approach. 

02CT4ZZ ....................... Extirpation of matter from left pulmonary vein, percutaneous endoscopic approach. 

02CV0ZZ ...................... Extirpation of matter from superior vena cava, open approach. 

02CV3ZZ ...................... Extirpation of matter from superior vena cava, percutaneous approach. 

02CV4ZZ ...................... Extirpation of matter from superior vena cava, percutaneous endoscopic approach. 

03C00ZZ ....................... Extirpation of matter from right internal mammary artery, open approach. 

03C03ZZ ....................... Extirpation of matter from right internal mammary artery, percutaneous approach. 

03C04ZZ ....................... Extirpation of matter from right internal mammary artery, percutaneous endoscopic approach. 

03C10ZZ ....................... Extirpation of matter from left internal mammary artery, open approach. 

03C13ZZ ....................... Extirpation of matter from left internal mammary artery, percutaneous approach. 

03C14ZZ ....................... Extirpation of matter from left internal mammary artery, percutaneous endoscopic approach. 

03C20ZZ ....................... Extirpation of matter from innominate artery, open approach. 

03C23ZZ ....................... Extirpation of matter from innominate artery, percutaneous approach. 

03C24ZZ ....................... Extirpation of matter from innominate artery, percutaneous endoscopic approach. 

03C30ZZ ....................... Extirpation of matter from right subclavian artery, open approach. 

03C33ZZ ....................... Extirpation of matter from right subclavian artery, percutaneous approach. 

03C34ZZ ....................... Extirpation of matter from right subclavian artery, percutaneous endoscopic approach. 

03C40ZZ ....................... Extirpation of matter from left subclavian artery, open approach. 

03C43ZZ ....................... Extirpation of matter from left subclavian artery, percutaneous approach. 

03C44ZZ ....................... Extirpation of matter from left subclavian artery, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.16 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.16 are shown in Table 6P.1c for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.35 

ICD–10–PCS code Code description 

02BP0ZZ ....................... Excision of pulmonary trunk, open approach. 

02BP4ZZ ....................... Excision of pulmonary trunk, percutaneous endoscopic approach. 

02BQ0ZZ ...................... Excision of right pulmonary artery, open approach. 

02BQ4ZZ ...................... Excision of right pulmonary artery, percutaneous endoscopic approach. 

02BR0ZZ ...................... Excision of left pulmonary artery, open approach. 

02BR4ZZ ...................... Excision of left pulmonary artery, percutaneous endoscopic approach. 

02BS0ZZ ....................... Excision of right pulmonary vein, open approach. 

02BS4ZZ ....................... Excision of right pulmonary vein, percutaneous endoscopic approach. 

02BT0ZZ ....................... Excision of left pulmonary vein, open approach. 

02BT4ZZ ....................... Excision of left pulmonary vein, percutaneous endoscopic approach. 

02BV0ZZ ....................... Excision of superior vena cava, open approach. 

02BV4ZZ ....................... Excision of superior vena cava, percutaneous endoscopic approach. 

03B00ZZ ....................... Excision of right internal mammary artery, open approach. 

03B04ZZ ....................... Excision of right internal mammary artery, percutaneous endoscopic approach. 

03B10ZZ ....................... Excision of left internal mammary artery, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24373 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.35—Continued 

ICD–10–PCS code Code description 

03B14ZZ ....................... Excision of left internal mammary artery, percutaneous endoscopic approach. 

03B20ZZ ....................... Excision of innominate artery, open approach. 

03B24ZZ ....................... Excision of innominate artery, percutaneous endoscopic approach. 

03B30ZZ ....................... Excision of right subclavian artery, open approach. 

03B34ZZ ....................... Excision of right subclavian artery, percutaneous endoscopic approach. 

03B40ZZ ....................... Excision of left subclavian artery, open approach. 

03B44ZZ ....................... Excision of left subclavian artery, percutaneous endoscopic approach. 

05B00ZZ ....................... Excision of azygos vein, open approach. 

05B04ZZ ....................... Excision of azygos vein, percutaneous endoscopic approach. 

05B10ZZ ....................... Excision of hemiazygos vein, open approach. 

05B14ZZ ....................... Excision of hemiazygos vein, percutaneous endoscopic approach. 

05B30ZZ ....................... Excision of right innominate vein, open approach. 

05B34ZZ ....................... Excision of right innominate vein, percutaneous endoscopic approach. 

05B40ZZ ....................... Excision of left innominate vein, open approach. 

05B44ZZ ....................... Excision of left innominate vein, percutaneous endoscopic approach. 

05B50ZZ ....................... Excision of right subclavian vein, open approach. 

05B54ZZ ....................... Excision of right subclavian vein, percutaneous endoscopic approach. 

05B60ZZ ....................... Excision of left subclavian vein, open approach. 

05B64ZZ ....................... Excision of left subclavian vein, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.36 

ICD–10–PCS code Code description 

04B10ZZ ....................... Excision of celiac artery, open approach. 

04B14ZZ ....................... Excision of celiac artery, percutaneous endoscopic approach. 

04B20ZZ ....................... Excision of gastric artery, open approach. 

04B24ZZ ....................... Excision of gastric artery, percutaneous endoscopic approach. 

04B30ZZ ....................... Excision of hepatic artery, open approach. 

04B34ZZ ....................... Excision of hepatic artery, percutaneous endoscopic approach. 

04B40ZZ ....................... Excision of splenic artery, open approach. 

04B44ZZ ....................... Excision of splenic artery, percutaneous endoscopic approach. 

04B50ZZ ....................... Excision of superior mesenteric artery, open approach. 

04B54ZZ ....................... Excision of superior mesenteric artery, percutaneous endoscopic approach. 

04B60ZZ ....................... Excision of right colic artery, open approach. 

04B64ZZ ....................... Excision of right colic artery, percutaneous endoscopic approach. 

04B70ZZ ....................... Excision of left colic artery, open approach. 

04B74ZZ ....................... Excision of left colic artery, percutaneous endoscopic approach. 

04B80ZZ ....................... Excision of middle colic artery, open approach. 

04B84ZZ ....................... Excision of middle colic artery, percutaneous endoscopic approach. 

04B90ZZ ....................... Excision of right renal artery, open approach. 

04B94ZZ ....................... Excision of right renal artery, percutaneous endoscopic approach. 

04BA0ZZ ....................... Excision of left renal artery, open approach. 

04BA4ZZ ....................... Excision of left renal artery, percutaneous endoscopic approach. 

04BB0ZZ ....................... Excision of inferior mesenteric artery, open approach. 

04BB4ZZ ....................... Excision of inferior mesenteric artery, percutaneous endoscopic approach. 

04BC0ZZ ...................... Excision of right common iliac artery, open approach. 

04BC4ZZ ...................... Excision of right common iliac artery, percutaneous endoscopic approach. 

04BD0ZZ ...................... Excision of left common iliac artery, open approach. 

04BD4ZZ ...................... Excision of left common iliac artery, percutaneous endoscopic approach. 

04BE0ZZ ....................... Excision of right internal iliac artery, open approach. 

04BE4ZZ ....................... Excision of right internal iliac artery, percutaneous endoscopic approach. 

04BF0ZZ ....................... Excision of left internal iliac artery, open approach. 

04BF4ZZ ....................... Excision of left internal iliac artery, percutaneous endoscopic approach. 

04BH0ZZ ...................... Excision of right external iliac artery, open approach. 

04BH4ZZ ...................... Excision of right external iliac artery, percutaneous endoscopic approach. 

04BJ0ZZ ....................... Excision of left external iliac artery, open approach. 

04BJ4ZZ ....................... Excision of left external iliac artery, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.37 

ICD–10–PCS code Code description 

06B00ZZ ....................... Excision of inferior vena cava, open approach. 

06B04ZZ ....................... Excision of inferior vena cava, percutaneous endoscopic approach. 

06B10ZZ ....................... Excision of splenic vein, open approach. 

06B14ZZ ....................... Excision of splenic vein, percutaneous endoscopic approach. 

06B20ZZ ....................... Excision of gastric vein, open approach. 

06B24ZZ ....................... Excision of gastric vein, percutaneous endoscopic approach. 

06B40ZZ ....................... Excision of hepatic vein, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24374 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.37—Continued 

ICD–10–PCS code Code description 

06B44ZZ ....................... Excision of hepatic vein, percutaneous endoscopic approach. 

06B50ZZ ....................... Excision of superior mesenteric vein, open approach. 

06B54ZZ ....................... Excision of superior mesenteric vein, percutaneous endoscopic approach. 

06B60ZZ ....................... Excision of inferior mesenteric vein, open approach. 

06B64ZZ ....................... Excision of inferior mesenteric vein, percutaneous endoscopic approach. 

06B70ZZ ....................... Excision of colic vein, open approach. 

06B74ZZ ....................... Excision of colic vein, percutaneous endoscopic approach. 

06B80ZZ ....................... Excision of portal vein, open approach. 

06B84ZZ ....................... Excision of portal vein, percutaneous endoscopic approach. 

06B90ZZ ....................... Excision of right renal vein, open approach. 

06B94ZZ ....................... Excision of right renal vein, percutaneous endoscopic approach. 

06BB0ZZ ....................... Excision of left renal vein, open approach. 

06BB4ZZ ....................... Excision of left renal vein, percutaneous endoscopic approach. 

06BC0ZZ ...................... Excision of right common iliac vein, open approach. 

06BC4ZZ ...................... Excision of right common iliac vein, percutaneous endoscopic approach. 

06BD0ZZ ...................... Excision of left common iliac vein, open approach. 

06BD4ZZ ...................... Excision of left common iliac vein, percutaneous endoscopic approach. 

06BF0ZZ ....................... Excision of right external iliac vein, open approach. 

06BF4ZZ ....................... Excision of right external iliac vein, percutaneous endoscopic approach. 

06BG0ZZ ...................... Excision of left external iliac vein, open approach. 

06BG4ZZ ...................... Excision of left external iliac vein, percutaneous endoscopic approach. 

06BH0ZZ ...................... Excision of right hypogastric vein, open approach. 

06BH4ZZ ...................... Excision of right hypogastric vein, percutaneous endoscopic approach. 

06BJ0ZZ ....................... Excision of left hypogastric vein, open approach. 

06BJ4ZZ ....................... Excision of left hypogastric vein, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.46 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.46 are shown in Table 6P.1d for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.47 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.47 are shown in Table 6P.1e for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

There is not an equivalent ICD–10– 

PCS code translation for ICD–9–CM 

procedure code 38.55. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.65 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.65 are shown in Table 6P.1f for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.66 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.66 are shown in Table 6P.1g for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24375 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.67 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.67 are shown in Table 6P.1h for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.85 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.85 are shown in Table 6P.1i for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.86 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.86 are shown in Table 6P.1j for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 38.87 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 38.87 are shown in Table 6P.1k for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.0 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.0 are shown in Table 6P.1l for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.1 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.1 are shown in Table 6P.1m for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.21 

ICD–10–PCS code Code description 

021V09P ....................... Bypass superior vena cava to pulmonary trunk with autologous venous tissue, open approach. 

021V09Q ....................... Bypass superior vena cava to right pulmonary artery with autologous venous tissue, open approach.

021V09R ....................... Bypass superior vena cava to left pulmonary artery with autologous venous tissue, open approach. 

021V0AP ....................... Bypass superior vena cava to pulmonary trunk with autologous arterial tissue, open approach. 

021V0AQ ...................... Bypass superior vena cava to right pulmonary artery with autologous arterial tissue, open approach. 

021V0AR ...................... Bypass superior vena cava to left pulmonary artery with autologous arterial tissue, open approach.

021V0JP ....................... Bypass superior vena cava to pulmonary trunk with synthetic substitute, open approach. 

021V0JQ ....................... Bypass superior vena cava to right pulmonary artery with synthetic substitute, open approach. 

021V0JR ....................... Bypass superior vena cava to left pulmonary artery with synthetic substitute, open approach. 

021V0KP ....................... Bypass superior vena cava to pulmonary trunk with nonautologous tissue substitute, open approach.

021V0KQ ...................... Bypass superior vena cava to right pulmonary artery with nonautologous tissue substitute, open approach. 

021V0KR ...................... Bypass superior vena cava to left pulmonary artery with nonautologous tissue substitute, open approach. 

021V0ZP ....................... Bypass superior vena cava to pulmonary trunk, open approach. 

021V0ZQ ...................... Bypass superior vena cava to right pulmonary artery, open approach. 

021V0ZR ....................... Bypass superior vena cava to left pulmonary artery, open approach. 

021V49P ....................... Bypass superior vena cava to pulmonary trunk with autologous venous tissue, percutaneous endoscopic approach. 

021V49Q ....................... Bypass superior vena cava to right pulmonary artery with autologous venous tissue, percutaneous endoscopic approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24376 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.21—Continued 

ICD–10–PCS code Code description 

021V49R ....................... Bypass superior vena cava to left pulmonary artery with autologous venous tissue, percutaneous endoscopic approach. 

021V4AP ....................... Bypass superior vena cava to pulmonary trunk with autologous arterial tissue, percutaneous endoscopic approach. 

021V4AQ ...................... Bypass superior vena cava to right pulmonary artery with autologous arterial tissue, percutaneous endoscopic approach. 

021V4AR ...................... Bypass superior vena cava to left pulmonary artery with autologous arterial tissue, percutaneous endoscopic approach. 

021V4JP ....................... Bypass superior vena cava to pulmonary trunk with synthetic substitute, percutaneous endoscopic approach. 

021V4JQ ....................... Bypass superior vena cava to right pulmonary artery with synthetic substitute, percutaneous endoscopic approach. 

021V4JR ....................... Bypass superior vena cava to left pulmonary artery with synthetic substitute, percutaneous endoscopic approach. 

021V4KP ....................... Bypass superior vena cava to pulmonary trunk with nonautologous tissue substitute, percutaneous endoscopic approach. 

021V4KQ ...................... Bypass superior vena cava to right pulmonary artery with nonautologous tissue substitute, percutaneous endoscopic 

approach. 

021V4KR ...................... Bypass superior vena cava to left pulmonary artery with nonautologous tissue substitute, percutaneous endoscopic 

approach. 

021V4ZP ....................... Bypass superior vena cava to pulmonary trunk, percutaneous endoscopic approach. 

021V4ZQ ...................... Bypass superior vena cava to right pulmonary artery, percutaneous endoscopic approach. 

021V4ZR ....................... Bypass superior vena cava to left pulmonary artery, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.22 

ICD–10–PCS code Code description 

021W09B ...................... Bypass thoracic aorta to subclavian with autologous venous tissue, open approach). 

021W09D ...................... Bypass thoracic aorta to carotid with autologous venous tissue, open approach). 

021W0AB ...................... Bypass thoracic aorta to subclavian with autologous arterial tissue, open approach. 

021W0AD ..................... Bypass thoracic aorta to carotid with autologous arterial tissue, open approach. 

021W0JB ...................... Bypass thoracic aorta to subclavian with synthetic substitute, open approach. 

021W0JD ...................... Bypass thoracic aorta to carotid with synthetic substitute, open approach. 

021W0KB ...................... Bypass thoracic aorta to subclavian with nonautologous tissue substitute, open approach. 

021W0KD ..................... Bypass thoracic aorta to carotid with nonautologous tissue substitute, open approach. 

021W0ZB ...................... Bypass thoracic aorta to subclavian, open approach. 

021W0ZD ...................... Bypass thoracic aorta to carotid, open approach. 

021W49B ...................... Bypass thoracic aorta to subclavian with autologous venous tissue, percutaneous endoscopic approach. 

021W49D ...................... Bypass thoracic aorta to carotid with autologous venous tissue, percutaneous endoscopic approach. 

021W4AB ...................... Bypass thoracic aorta to subclavian with autologous arterial tissue, percutaneous endoscopic approach. 

021W4AD ..................... Bypass thoracic aorta to carotid with autologous arterial tissue, percutaneous endoscopic approach.

021W4JB ...................... Bypass thoracic aorta to subclavian with synthetic substitute, percutaneous endoscopic approach. 

021W4JD ...................... Bypass thoracic aorta to carotid with synthetic substitute, percutaneous endoscopic approach. 

021W4KB ...................... Bypass thoracic aorta to subclavian with nonautologous tissue substitute, percutaneous endoscopic approach. 

021W4KD ..................... Bypass thoracic aorta to carotid with nonautologous tissue substitute, percutaneous endoscopic approach. 

021W4ZB ...................... Bypass thoracic aorta to subclavian, percutaneous endoscopic approach. 

021W4ZD ...................... Bypass thoracic aorta to carotid, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.23 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.23 are shown in Table 6P.1n for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.25 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.25 are shown in Table 6P.1o for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.26 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.26 are shown in Table 6P.1p for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24377 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.52 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.52 are shown in Table 6P.1q for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.54 

ICD–10–PCS code Code description 

02QW0ZZ ..................... Repair thoracic aorta, open approach. 

02QW3ZZ ..................... Repair thoracic aorta, percutaneous approach. 

02QW4ZZ ..................... Repair thoracic aorta, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.72 

ICD–10–PCS code Code description 

03LR0DZ ...................... Occlusion of face artery with intraluminal device, open approach. 

03LR3DZ ...................... Occlusion of face artery with intraluminal device, percutaneous approach. 

03LR4DZ ...................... Occlusion of face artery with intraluminal device, percutaneous endoscopic approach. 

03LS0DZ ....................... Occlusion of right temporal artery with intraluminal device, open approach. 

03LS3DZ ....................... Occlusion of right temporal artery with intraluminal device, percutaneous approach. 

03LS4DZ ....................... Occlusion of right temporal artery with intraluminal device, percutaneous endoscopic approach. 

03LT0DZ ....................... Occlusion of left temporal artery with intraluminal device, open approach. 

03LT3DZ ....................... Occlusion of left temporal artery with intraluminal device, percutaneous approach. 

03LT4DZ ....................... Occlusion of left temporal artery with intraluminal device, percutaneous endoscopic approach. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.75 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.75 are shown in Table 6P.1r for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.76 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.76 are shown in Table 6P.1s for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

ICD–10–PCS CODE TRANSLATIONS FOR ICD–9–CM PROCEDURE CODE 39.79 

ICD–10–PCS code Code description 

The comparable ICD–10–PCS code translations for ICD–9–CM procedure code 39.79 are shown in Table 6P.1t for this proposed rule, which is 

available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/

index.html. 

As previously stated, we separated the 

more complex, more invasive 

procedures from the less complex, less 

invasive procedures to continue our 

evaluation of the procedures assigned to 

MS–DRGs 237 and 238. Our data 

analysis showed that the distribution of 

cases, the average length of stay, and 

average costs of the more complex, more 

invasive aortic and heart assist 

procedures and the less complex, less 

invasive other cardiovascular 

procedures would be more 

appropriately reflected if we classified 

these distinguishing types of procedures 

under newly created MS–DRGs, as 

reflected in the table below. 

MAJOR CARDIOVASCULAR PROCEDURES WITH AND WITHOUT MCC 

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRGs 237 and 238—Combined .......................................................................................... 50,567 5.8 $29,174 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24378 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MAJOR CARDIOVASCULAR PROCEDURES WITH AND WITHOUT MCC—Continued 

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

MS–DRGs 237 and 238—Cases with more complex, more invasive procedure codes (37.41; 

37.49; 37.55; 37.64; 38.04; 38.14; 38.34; 38.44; 38.64; 38.84; 39.24; 39.71, and 39.78) ..... 22,278 4.0 31,729 

MS–DRGs 237 and 238—Cases with less complex, less invasive procedure codes (35.00; 

35.01; 35.02; 35.03; 35.04; 37.12; 37.24; 37.31; 37.61; 37.67; 37.91; 37.99; 38.05; 38.06; 

38.07; 38.15; 38.16; 38.35; 38.36; 38.37; 38.46; 38.47; 38.55; 38.65; 38.66; 38.67; 38.85; 

38.86; 38.87; 39.0; 39.1; 39.21; 39.22; 39.23; 39.25; 39.26; 39.52; 39.54; 39.72; 39.75; 

39.76; and 39.79) ..................................................................................................................... 28,289 7.1 27,162 

Our clinical advisors reviewed the 

results of the analysis and agreed that 

distinguishing the more complex, more 

invasive procedures from the less 

complex, less invasive procedures 

would result in improved clinical 

coherence for the various cardiovascular 

procedures currently assigned to MS– 

DRGs 237 and 238, as listed previously. 

Therefore, for FY 2016, we are 

proposing to delete MS–DRGs 237 and 

238. When we applied our established 

criteria to determine if the creation of a 

new CC or MCC subgroup within a base 

MS–DRG is warranted, we determined 

that a 2-way severity level split (with 

MCC and without MCC) was justified. 

Therefore, we are proposing to create 

two new MS–DRGs that would contain 

the more complex, more invasive aortic 

and heart assist procedures currently 

assigned to MS–DRGs 237 and 238, as 

listed previously. We are proposing to 

create MS–DRG 268, entitled ‘‘Aortic 

and Heart Assist Procedures Except 

Pulsation Balloon with MCC,’’ and MS– 

DRG 269, entitled ‘‘Aortic and Heart 

Assist Procedures Except Pulsation 

Balloon without MCC.’’ The table below 

shows the distribution of cases and the 

average length of stay and average costs 

of the more complex, more invasive 

procedures for aortic and heart 

assistance for the proposed new MS– 

DRGs 268 and 269. 

PROPOSED NEW MS–DRGS FOR AORTIC AND HEART ASSIST PROCEDURES

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

Proposed New MS–DRG 268 with MCC .................................................................................... 4,182 10.03 $45,996 

Proposed New MS–DRG 269 without MCC ............................................................................... 18,096 2.68 28,431 

We are inviting public comments on 

this proposal and the ICD–10–PCS code 

translations for these procedures shown 

earlier in this section, which we also are 

proposing to assign to proposed new 

MS–DRGs 268 and 269. 

In addition, when we further applied 

our established criteria to determine if 

the creation of a new CC or MCC 

subgroup for the remaining procedures 

was warranted, we determined that a 3- 

way severity level split (with MCC, with 

CC, and without CC/MCC) was justified. 

Therefore, we are proposing to create 

three new MS–DRGs that would contain 

the remaining cardiovascular 

procedures that were designated as the 

less complex, less invasive procedures, 

as listed previously. For FY 2016, we 

are proposing to create MS–DRG 270, 

entitled ‘‘Other Major Cardiovascular 

Procedures with MCC’’; MS–DRG 271, 

entitled ‘‘Other Major Cardiovascular 

Procedures with CC’’; and MS–DRG 272, 

entitled ‘‘Other Major Cardiovascular 

Procedures without CC/MCC,’’ and to 

assign the less complex, less invasive 

cardiovascular procedures shown earlier 

in this section to these proposed new 

MS–DRGs. We believe that, as shown in 

the table below, the distribution of cases 

and average length of stay and average 

costs of these procedures would be more 

appropriately reflected when these 

types of procedures are classified under 

these proposed new MS–DRGs. 

PROPOSED NEW MS–DRGS FOR OTHER MAJOR CARDIOVASCULAR PROCEDURES

MS–DRG Number 

of cases 

Average 

length of stay 

Average 

costs 

Proposed New MS–DRG 270 with MCC .................................................................................... 14,158 9.3 $33,507 

Proposed New MS–DRG 271 with CC ....................................................................................... 9,648 5.99 22,800 

Proposed New MS–DRG 272 without CC/MCC ......................................................................... 4,483 3.08 16,438 

We are inviting public comments on 

this proposal and the ICD–10–PCS code 

translations for the less complex, less 

invasive cardiovascular procedures 

shown earlier in this section, which we 

also are proposing to assign to proposed 

new MS–DRGs 270, 271, and 272. 

In summary, for FY 2016, we are 

proposing to delete MS–DRGs 237 and 

238, and to create the following five 

new MS–DRGs: 

• Proposed new MS–DRG 268 (Aortic 

and Heart Assist Procedures Except 

Pulsation Balloon with MCC); 

• Proposed new MS–DRG 269 (Aortic 

and Heart Assist Procedures Except 

Pulsation Balloon without MCC); 

• Proposed new MS–DRG 270 (Other 

Major Cardiovascular Procedures with 

MCC); 

• Proposed new MS–DRG 271 (Other 

Major Cardiovascular Procedures with 

CC); and 

• Proposed new MS–DRG 272 (Other 

Major Cardiovascular Procedures 

without CC/MCC). 

We also are proposing to assign the 

more complex, more invasive 

cardiovascular procedures identified in 

our analysis and the ICD–10–PCS code 

translations to proposed new MS–DRGs 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24379 

268 and 269. In addition, we are 

proposing to assign the less complex, 

less invasive cardiovascular procedures 

identified in our analysis and the ICD– 

10–PCS code translations to proposed 

new MS–DRGs 270, 271, and 272. We 

encourage public comments on our 

proposal to create these proposed new 

MS–DRGs, as well as the ICD–10–PCS 

code translations that we are proposing 

to assign to the corresponding proposed 

new MS–DRGs. 

4. MDC 8 (Diseases and Disorders of the 

Musculoskeletal System and Connective 

Tissue) 

a. Revision of Hip or Knee 

Replacements: Proposed Revision of 

ICD–10–PCS Version 32 Logic 

We received two comments that the 

logic for ICD–10 MS–DRGs Version 32 

does not work the same as it does for the 

ICD–9–CM based MS–DRGs Version 32 

for joint revisions. One of the 

commenters requested that CMS change 

the MS–DRG structure for joint 

revisions within the ICD–10 MS–DRGs 

466, 467, and 468 (Revision of Hip or 

Knee Replacement with MCC, with CC, 

and without CC/MCC, respectively) so 

that cases that have a spacer removed 

prior to the insertion of a new joint 

prosthesis are assigned to MS–DRG 466, 

467, and 468, as is the case with the 

ICD–9–CM MS–DRGs. The other 

commenter asked that joint revision 

cases that involve knee revisions with 

cemented and uncemented qualifiers be 

assigned to these MS–DRGs. This 

commenter provided an example of a 

patient admitted for a knee revision and 

reported under ICD–10–PCS codes 

0SPD0JZ (Removal of synthetic 

substitute from left knee joint, open 

approach) and 0SRU0JA (Replacement 

of left knee joint, femoral surface with 

synthetic substitute, uncemented, open 

approach), which should be assigned to 

MS–DRGs 466, 467, and 468. The 

requestor stated that revision cases 

coded with ICD–9–CM codes are 

assigned to MS–DRGs 466, 467, and 

468, but similar cases reported with 

these ICD–10–PCS codes are not 

assigned to MS–DRGs 466, 467, and 468 

in ICD–10–PCS MS–DRGs Version 32. 

We agree that joint revision cases with 

the removal of a spacer and subsequent 

insertion of a new joint prosthesis 

should be assigned to MS–DRGs 466, 

467, and 468 as is the case currently 

with the ICD–9–CM based MS–DRGs 

Version 32. We also agree that knee 

revisions that involve cemented and 

uncemented qualifiers should be 

assigned to MS–DRGs 466, 467, and 

468. Knee revision cases currently 

reported with ICD–9–CM codes are 

assigned to MS–DRGs 466, 467, and 468 

in the ICD–9–CM based MS–DRGs. We 

examined joint revision combination 

codes that are not currently assigned to 

MS–DRGs 466, 467, and 468 in ICD–10 

MS–DRGs Version 32 and identified 

additional combinations that also 

should be included so that the joint 

revision MS–DRGs would have the same 

logic as the ICD–9–CM MS–DRGs. We 

are proposing to add the following code 

combinations which capture the joint 

revisions to the Version 33 MS–DRG 

structure for ICD–10 MS–DRGs 466, 

467, and 468 that we are proposing to 

implement effective October 1, 2015. 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR9019 ..... Replacement of right hip joint with metal synthetic 

substitute, cemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR901A ..... Replacement of right hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR901Z ..... Replacement of right hip joint with metal synthetic 

substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR9029 ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR902A ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR902Z ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR9039 ..... Replacement of right hip joint with ceramic synthetic substitute, cemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR903A ..... Replacement of right hip joint with ceramic synthetic substitute, uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR903Z ..... Replacement of right hip joint with ceramic synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR90J9 ..... Replacement of right hip joint with synthetic substitute, cemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR90JA ..... Replacement of right hip joint with synthetic substitute, uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SR90JZ ..... Replacement of right hip joint with synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA009 ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24380 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA00A .... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA00Z ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA019 ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA01A .... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA01Z ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA039 ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA03A .... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA03Z ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA0J9 ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, cemented, pen approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA0JA ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRA0JZ ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR019 ..... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR01A .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR01Z .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR039 ..... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR03A .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR03Z .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR0J9 ..... Replacement of right hip joint, femoral surface with 

synthetic Substitute, cemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR0JA .... Replacement of right hip joint, femoral surface with 

synthetic Substitute, uncemented, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SRR0JZ ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SU909Z ..... Supplement right hip joint with liner, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SUA09Z ..... Supplement right hip joint, acetabular surface with 

liner, open approach. 

0SP908Z ...... Removal of spacer from right hip joint, open approach.and 0SUR09Z .... Supplement right hip joint, femoral surface with 

liner, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR9019 ..... Replacement of right hip joint with metal synthetic 

substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR901A ..... Replacement of right hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR901Z ..... Replacement of right hip joint with metal synthetic 

substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR9029 ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24381 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR902A ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR902Z ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR9039 ..... Replacement of right hip joint with ceramic synthetic substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR903A ..... Replacement of right hip joint with ceramic synthetic substitute, uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR903Z ..... Replacement of right hip joint with ceramic synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR90J9 ..... Replacement of right hip joint with synthetic substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR90JA ..... Replacement of right hip joint with synthetic substitute, uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SR90JZ ..... Replacement of right hip joint with synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA009 ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA00A .... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA00Z ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA019 ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA01A .... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA01Z ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA039 ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA03A .... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA03Z ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA0J9 ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA0JA ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRA0JZ ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR019 ..... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR01A .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR01Z .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24382 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR039 ..... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR03A .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR03Z .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR0J9 ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR0JA .... Replacement of right hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SRR0JZ ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SU909Z ..... Supplement right hip joint with liner, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SUA09Z ..... Supplement right hip joint, acetabular surface with 

liner, open approach. 

0SP909Z ...... Removal of liner from right hip joint, open approach.and 0SUR09Z .... Supplement right hip joint, femoral surface with 

liner, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR9019 ..... Replacement of right hip joint with metal synthetic 

substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR901A ..... Replacement of right hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR901Z ..... Replacement of right hip joint with metal synthetic 

substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR9029 ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR902A ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR902Z ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR9039 ..... Replacement of right hip joint with ceramic synthetic substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR903A ..... Replacement of right hip joint with ceramic synthetic substitute, uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR903Z ..... Replacement of right hip joint with ceramic synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR90J9 ..... Replacement of right hip joint with synthetic substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR90JA ..... Replacement of right hip joint with synthetic substitute, uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SR90JZ ..... Replacement of right hip joint with synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA009 ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA00A .... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA00Z ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA019 ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA01A .... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24383 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA01Z ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA039 ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA03A .... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA03Z ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA0J9 ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA0JA ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRA0JZ ..... Replacement of right hip joint, acetabular Surface 

with synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR019 ..... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR01A .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR01Z .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR039 ..... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR03A .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR03Z .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR0J9 ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR0JA .... Replacement of right hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SRR0JZ ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SU909Z ..... Supplement right hip joint with liner, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SUA09Z ..... Supplement right hip joint, acetabular surface with 

liner, open approach. 

0SP90BZ ..... Removal of resurfacing device from right hip joint, 

open approach.

and 0SUR09Z .... Supplement right hip joint, femoral surface with 

liner, open approach. 

0SP90JZ ...... Removal of synthetic substitute from right hip joint, 

open approach.

and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP90JZ ...... Removal of synthetic substitute from right hip joint, 

open approach.

and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP90JZ ...... Removal of synthetic substitute from right hip joint, 

open approach.

and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR9019 ..... Replacement of right hip joint with metal synthetic 

substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR901A ..... Replacement of right hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR901Z ..... Replacement of right hip joint with metal synthetic 

substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR9029 ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR902A ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR902Z ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24384 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR9039 ..... Replacement of right hip joint with ceramic synthetic substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR903A ..... Replacement of right hip joint with ceramic synthetic substitute, uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR903Z ..... Replacement of right hip joint with ceramic synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR90J9 ..... Replacement of right hip joint with synthetic substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR90JA ..... Replacement of right hip joint with synthetic substitute, uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SR90JZ ..... Replacement of right hip joint with synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA009 ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA00A .... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA00Z ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA019 ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA01A .... Replacement of right hip joint, acetabular Surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA01Z ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA039 ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA03A .... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA03Z ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0J9 ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0JA ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0JZ ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR019 ..... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR01A .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR01Z .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR039 ..... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR03A .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24385 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR03Z .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0J9 ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0JA .... Replacement of right hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0JZ ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SU909Z ..... Supplement right hip joint with liner, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SUA09Z ..... Supplement right hip joint, acetabular surface with 

liner, open approach. 

0SP948Z ...... Removal of spacer from right hip joint, 

percutaneous endoscopic approach.

and 0SUR09Z .... Supplement right hip joint, femoral surface with 

liner, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR9019 ..... Replacement of right hip joint with metal synthetic 

substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR901A ..... Replacement of right hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR901Z ..... Replacement of right hip joint with metal synthetic 

substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR9029 ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR902A ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR902Z ..... Replacement of right hip joint with metal on polyethylene synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR9039 ..... Replacement of right hip joint with ceramic synthetic substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR903A ..... Replacement of right hip joint with ceramic synthetic substitute, uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR903Z ..... Replacement of right hip joint with ceramic synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR9049 ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR904A ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, uncemented, 

open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR904Z ..... Replacement of right hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR90J9 ..... Replacement of right hip joint with synthetic substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR90JA ..... Replacement of right hip joint with synthetic substitute, uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SR90JZ ..... Replacement of right hip joint with synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA009 ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA00A .... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA00Z ..... Replacement of right hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA019 ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA01A .... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA01Z ..... Replacement of right hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA039 ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24386 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA03A .... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA03Z ..... Replacement of right hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0J9 ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0JA ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRA0JZ ..... Replacement of right hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR019 ..... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR01A .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR01Z .... Replacement of right hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR039 ..... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR03A .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR03Z .... Replacement of right hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0J9 ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0JA .... Replacement of right hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SRR0JZ ..... Replacement of right hip joint, femoral surface with 

synthetic substitute, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SU909Z ..... Supplement right hip joint with liner, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SUA09Z ..... Supplement right hip joint, acetabular surface with 

liner, open approach. 

0SP94JZ ...... Removal of synthetic substitute from right hip joint, 

percutaneous endoscopic approach.

and 0SUR09Z .... Supplement right hip joint, femoral surface with 

liner, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB019 ..... Replacement of left hip joint with metal synthetic 

substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB01A .... Replacement of left hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB01Z ..... Replacement of left hip joint with metal synthetic 

substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB029 ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB02A .... Replacement of left hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB02Z ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB039 ..... Replacement of left hip joint with ceramic synthetic 

substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB03A .... Replacement of left hip joint with ceramic synthetic 

substitute, uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB03Z ..... Replacement of left hip joint with ceramic synthetic 

substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24387 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB0J9 ..... Replacement of left hip joint with synthetic substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB0JA ..... Replacement of left hip joint with synthetic substitute, uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRB0JZ ..... Replacement of left hip joint with synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE009 ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE00A .... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE00Z ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE019 ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE01A .... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE01Z ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE039 ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE03A .... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE03Z ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE0J9 ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE0JA ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRE0JZ ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS019 ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS01A .... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS01Z ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS039 ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS03A .... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS03Z ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS0J9 ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS0JA ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SRS0JZ ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SUB09Z ..... Supplement left hip joint with liner, open approach. 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SUE09Z ..... Supplement left hip joint, acetabular surface with 

liner, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24388 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB08Z ..... Removal of spacer from left hip joint, open approach.and 0SUS09Z ..... Supplement left hip joint, femoral surface with 

liner, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB019 ..... Replacement of left hip joint with metal synthetic 

substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB01A .... Replacement of left hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB01Z ..... Replacement of left hip joint with metal synthetic 

substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB029 ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB02A .... Replacement of left hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB02Z ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB039 ..... Replacement of left hip joint with ceramic synthetic 

substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB03A .... Replacement of left hip joint with ceramic synthetic 

substitute, uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB03Z ..... Replacement of left hip joint with ceramic synthetic 

substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB0J9 ..... Replacement of left hip joint with synthetic substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB0JA ..... Replacement of left hip joint with synthetic substitute, uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRB0JZ ..... Replacement of left hip joint with synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE009 ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE00A .... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE00Z ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE019 ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE01A .... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE01Z ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE039 ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE03A .... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE03Z ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE0J9 ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE0JA ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRE0JZ ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24389 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS019 ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS01A .... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS01Z ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS039 ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS03A .... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS03Z ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS0J9 ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS0JA ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SRS0JZ ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SUB09Z ..... Supplement left hip joint with liner, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SUE09Z ..... Supplement left hip joint, acetabular surface with 

liner, open approach. 

0SPB09Z ..... Removal of liner from left hip joint, open approach and 0SUS09Z ..... Supplement left hip joint, femoral surface with

liner, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB019 ..... Replacement of left hip joint with metal synthetic 

substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB01A .... Replacement of left hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB01Z ..... Replacement of left hip joint with metal synthetic 

substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB029 ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB02A .... Replacement of left hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB02Z ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB039 ..... Replacement of left hip joint with ceramic synthetic 

substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB03A .... Replacement of left hip joint with ceramic synthetic 

substitute, uncemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB03Z ..... Replacement of left hip joint with ceramic synthetic 

substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB0J9 ..... Replacement of left hip joint with synthetic substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB0JA ..... Replacement of left hip joint with synthetic substitute, uncemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRB0JZ ..... Replacement of left hip joint with synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE009 ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE00A .... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24390 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE00Z ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE019 ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE01A .... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE01Z ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE039 ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE03A .... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE03Z ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE0J9 ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE0JA ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRE0JZ ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS019 ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS01A .... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS01Z ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS039 ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS03A .... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS03Z ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS0J9 ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS0JA ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SRS0JZ ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SUB09Z ..... Supplement left hip joint with liner, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SUE09Z ..... Supplement left hip joint, acetabular surface with 

liner, open approach. 

0SPB0BZ ..... Removal of resurfacing device from left hip joint, 

open approach.

and 0SUS09Z ..... Supplement left hip joint, femoral surface with 

liner, open approach. 

0SPB0JZ ...... Removal of synthetic substitute from left hip joint, 

open approach.

and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB0JZ ...... Removal of synthetic substitute from left hip joint, 

open approach.

and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB0JZ ...... Removal of synthetic substitute from left hip joint, 

open approach.

and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB019 ..... Replacement of left hip joint with metal synthetic 

substitute, cemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB01A .... Replacement of left hip joint with metal synthetic 

substitute, uncemented, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24391 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB01Z ..... Replacement of left hip joint with metal synthetic 

substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB029 ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB02A .... Replacement of left hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB02Z ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB039 ..... Replacement of left hip joint with ceramic synthetic 

substitute, cemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB03A .... Replacement of left hip joint with ceramic synthetic 

substitute, uncemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB03Z ..... Replacement of left hip joint with ceramic synthetic 

substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB0J9 ..... Replacement of left hip joint with synthetic substitute, cemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB0JA ..... Replacement of left hip joint with synthetic substitute, uncemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRB0JZ ..... Replacement of left hip joint with synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE009 ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE00A .... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE00Z ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE019 ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE01A .... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE01Z ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE039 ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE03A .... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE03Z ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE0J9 ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE0JA ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRE0JZ ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS019 ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24392 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS01A .... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS01Z ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS039 ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS03A .... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS03Z ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS0J9 ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS0JA ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SRS0JZ ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SUB09Z ..... Supplement left hip joint with liner, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SUE09Z ..... Supplement left hip joint, acetabular surface with 

liner, open approach. 

0SPB48Z ..... Removal of spacer from left hip joint, percutaneous 

endoscopic approach.

and 0SUS09Z ..... Supplement left hip joint, femoral surface with 

liner, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB019 ..... Replacement of left hip joint with metal synthetic 

substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB01A .... Replacement of left hip joint with metal synthetic 

substitute, uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB01Z ..... Replacement of left hip joint with metal synthetic 

substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB029 ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB02A .... Replacement of left hip joint with metal on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB02Z ..... Replacement of left hip joint with metal on polyethylene synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB039 ..... Replacement of left hip joint with ceramic synthetic 

substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB03A .... Replacement of left hip joint with ceramic synthetic 

substitute, uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB03Z ..... Replacement of left hip joint with ceramic synthetic 

substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB049 ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, cemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB04A .... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, uncemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB04Z ..... Replacement of left hip joint with ceramic on polyethylene synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB0J9 ..... Replacement of left hip joint with synthetic substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB0JA ..... Replacement of left hip joint with synthetic substitute, uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRB0JZ ..... Replacement of left hip joint with synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE009 ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, cemented, 

open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE00A .... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, 

uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE00Z ..... Replacement of left hip joint, acetabular surface 

with polyethylene synthetic substitute, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24393 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW HIP REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code description ICD–10–PCS code Code description 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE019 ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, cemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE01A .... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, uncemented, 

open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE01Z ..... Replacement of left hip joint, acetabular surface 

with metal synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE039 ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, cemented, 

open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE03A .... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, uncemented, 

open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE03Z ..... Replacement of left hip joint, acetabular surface 

with ceramic synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE0J9 ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE0JA ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRE0JZ ..... Replacement of left hip joint, acetabular surface 

with synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS019 ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS01A .... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, uncemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS01Z ..... Replacement of left hip joint, femoral surface with 

metal synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS039 ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, cemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS03A .... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, uncemented, open 

approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS03Z ..... Replacement of left hip joint, femoral surface with 

ceramic synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS0J9 ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, cemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS0JA ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, uncemented, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SRS0JZ ..... Replacement of left hip joint, femoral surface with 

synthetic substitute, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SUB09Z ..... Supplement left hip joint with liner, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SUE09Z ..... Supplement left hip joint, acetabular surface with 

liner, open approach. 

0SPB4JZ ...... Removal of synthetic substitute from left hip joint, 

percutaneous endoscopic approach.

and 0SUS09Z ..... Supplement left hip joint, femoral surface with 

liner, open approach 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS

ICD–10–PCS 

code Code descriptions ICD–10–PCS code Code description 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRC0J9 ..... Replacement of right knee joint with synthetic substitute, cemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRC0JA .... Replacement of right knee joint with synthetic substitute, uncemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRC0JZ ..... Replacement of right knee joint with synthetic substitute, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24394 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code descriptions ICD–10–PCS code Code description 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRT0J9 ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRT0JA ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRT0JZ ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRV0J9 ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRV0JA ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 

0SPC09Z Removal of liner from right knee joint, open approach.and 0SRV0JZ ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, open approach. 

0SPC0JZ Removal of synthetic substitute from right knee 

joint, open approach.

and 0SRT0J9 ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPC0JZ Removal of synthetic substitute from right knee 

joint, open approach.

and 0SRT0JA ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPC0JZ Removal of synthetic substitute from right knee 

joint, open approach.

and 0SRV0J9 ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPC0JZ Removal of synthetic substitute from right knee 

joint, open approach.

and 0SRV0JA ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 

0SPC4JZ Removal of synthetic substitute from right knee 

joint, percutaneous endoscopic approach.

and 0SRT0J9 ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPC4JZ Removal of synthetic substitute from right knee 

joint, percutaneous endoscopic approach.

and 0SRT0JA ..... Replacement of right knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPC4JZ Removal of synthetic substitute from right knee 

joint, percutaneous endoscopic approach.

and 0SRV0J9 ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPC4JZ Removal of synthetic substitute from right knee 

joint, percutaneous endoscopic approach.

and 0SRV0JA ..... Replacement of right knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRD0J9 ..... Replacement of left knee joint with synthetic substitute, cemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRD0JA .... Replacement of left knee joint with synthetic substitute, uncemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRD0JZ ..... Replacement of left knee joint with synthetic substitute, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRU0J9 ..... Replacement of left knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRU0JA .... Replacement of left knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRU0JZ ..... Replacement of left knee joint, femoral surface 

with synthetic substitute, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRW0J9 .... Replacement of left knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRW0JA .... Replacement of left knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 

0SPD09Z Removal of liner from left knee joint, open approach.and 0SRW0JZ .... Replacement of left knee joint, tibial surface with 

synthetic substitute, open approach. 

0SPD0JZ Removal of synthetic substitute from left knee 

joint, open approach.

and 0SRU0J9 ..... Replacement of left knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPD0JZ Removal of synthetic substitute from left knee 

joint, open approach.

and 0SRU0JA .... Replacement of left knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPD0JZ Removal of synthetic substitute from left knee 

joint, open approach.

and 0SRW0J9 .... Replacement of left knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPD0JZ Removal of synthetic substitute from left knee 

joint, open approach.

and 0SRW0JA .... Replacement of left knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24395 

MS–DRG 466–468 ICD–10–PCS CODE PAIRS TO BE ADDED TO THE VERSION 33 ICD–10 MS–DRGS 466, 467, AND

468: PROPOSED NEW KNEE REVISION ICD–10–PCS COMBINATIONS—Continued 

ICD–10–PCS 

code Code descriptions ICD–10–PCS code Code description 

0SPD0JZ Removal of synthetic substitute from left knee 

joint, open approach.

and 0SRW0JZ .... Replacement of left knee joint, tibial surface with 

synthetic substitute, open approach. 

0SPD4JZ Removal of synthetic substitute from left knee 

joint, percutaneous endoscopic approach.

and 0SRU0J9 ..... Replacement of left knee joint, femoral surface 

with synthetic substitute, cemented, open approach. 

0SPD4JZ Removal of synthetic substitute from left knee 

joint, percutaneous endoscopic approach.

and 0SRU0JA .... Replacement of left knee joint, femoral surface 

with synthetic substitute, uncemented, open approach. 

0SPD4JZ Removal of synthetic substitute from left knee 

joint, percutaneous endoscopic approach.

and 0SRW0J9 .... Replacement of left knee joint, tibial surface with 

synthetic substitute, cemented, open approach. 

0SPD4JZ Removal of synthetic substitute from left knee 

joint, percutaneous endoscopic approach.

and 0SRW0JA .... Replacement of left knee joint, tibial surface with 

synthetic substitute, uncemented, open approach. 

0SPD4JZ Removal of synthetic substitute from left knee 

joint, percutaneous endoscopic approach.

and 0SRW0JZ .... Replacement of left knee joint, tibial surface with 

synthetic substitute, open approach. 

We are inviting public comments on 

our proposal to add the joint revision 

code combinations listed above to MS– 

DRGs 466, 467, and 468. 

b. Spinal Fusion 

We received a request to revise the 

titles of MS–DRGs 456, 457, and 458 

(Spinal Fusion Except Cervical with 

Spinal Curvature/Malignancy/Infection 

or 9+ Fusion with MCC, with CC, and 

without CC/MCC, respectively) for the 

ICD–10 MS–DRGs so that they more 

closely correspond to the terminology 

used to describe the ICD–10–PCS 

procedure codes without changing the 

ICD–10 MS–DRG logic. We agree with 

the requestor that revising the titles of 

these MS–DRGs would more 

appropriately identify the procedures 

classified under these groupings. 

Therefore, we are proposing new titles 

for these three MS–DRGs that would 

change the reference of ‘‘9+ Fusions’’ to 

‘‘Extensive Fusions.’’ The proposed title 

revisions to MS–DRGs 456, 457, and 458 

for the FY 2016 ICD–10 MS–DRGs 

Version 33 are as follows: 

• MS–DRG 456 (Spinal Fusion Except 

Cervical with Spinal Curvature/

Malignancy/Infection or Extensive 

Fusion with MCC) 

• MS–DRG 457 (Spinal Fusion Except 

Cervical with Spinal Curvature/

Malignancy/Infection or Extensive 

Fusion with CC) 

• MS–DRG 458 (Spinal Fusion Except 

Cervical with Spinal Curvature/

Malignancy/Infection or Extensive 

Fusion without CC/MCC). 

We are inviting public comments on 

our proposal. 

5. MDC 14 (Pregnancy, Childbirth and 

the Puerperium): MS–DRG 775 (Vaginal 

Delivery Without Complicating 

Diagnosis) 

We received a request to modify the 

logic for ICD–10 MS–DRG 775 (Vaginal 

Delivery without Complicating 

Diagnosis) so that the procedure code 

for the induction of labor with a cervical 

ripening gel would not group to the 

incorrect MS–DRG when a normal 

delivery has occurred. ICD–10–PCS 

code 3E0P7GC (Introduction of other 

therapeutic substance into female 

reproductive, via natural or artificial 

opening) describes this procedure. 

We reviewed how this code is 

currently classified under the ICD–10 

MS–DRGs Version 32 and noted that it 

is currently designated as an operating 

room (O.R.) code affecting MS–DRG 

assignment. We agree with the requestor 

that the current logic for ICD–10–PCS 

procedure code 3E0P7GC does not 

result in the appropriate MS–DRG 

assignment. The result of our analysis 

suggests that this code should not be 

designated as an O.R. code. Our clinical 

advisors agree that this procedure does 

not require the intensity or complexity 

of service and resource utilization to 

merit an O.R. designation under ICD–10. 

Therefore, we are proposing to make 

ICD–10–PCS procedure code 3E0P7GC a 

non-O.R. code so that cases reporting 

this procedure code will group to the 

appropriate MS–DRG assignment. We 

are inviting public comments on our 

proposal. 

Our analysis of ICD–10–PCS code 

3E0P7GC also prompted the review of 

additional, similar codes that describe 

the introduction of a substance. We 

evaluated the following ICD–10–PCS 

procedure codes: 

• 3E0P76Z (Introduction of 

nutritional substance into female 

reproductive, via natural or artificial 

opening); 

• 3E0P77Z (Introduction of 

electrolytic and water balance substance 

into female reproductive, via natural or 

artificial opening); 

• 3E0P7SF (Introduction of other gas 

into female reproductive, via natural or 

artificial opening); 

• 3E0P83Z (Introduction of antiinflammatory into female reproductive, 

via natural or artificial opening 

endoscopic); 

• 3E0P86Z (Introduction of 

nutritional substance into female 

reproductive, via natural or artificial 

opening endoscopic); 

• 3E0P87Z (Introduction of 

electrolytic and water balance substance 

into female reproductive, via natural or 

artificial opening endoscopic); 

• 3E0P8GC (Introduction of other 

therapeutic substance into female 

reproductive, via natural or artificial 

opening endoscopic); and 

• 3E0P8SF (Introduction of other gas 

into female reproductive, via natural or 

artificial opening endoscopic). 

From our analysis, we determined 

that these codes also are currently 

designated as O.R. codes affecting MS– 

DRG assignment. Our clinical advisors 

recommended that these codes should 

also be designated as non-O.R. because 

they do not require the intensity or 

complexity of service and resource 

utilization to merit an O.R. designation 

under the ICD–10 MS–DRGs. As a result 

of our analysis and our clinical advisors’ 

recommendation, we are proposing to 

designate the above listed ICD–10–PCS 

procedure codes as non-O.R. codes to 

ensure that these codes will group to the 

appropriate MS–DRG assignment. 

We are inviting public comments on 

our proposal. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24396 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

6. MDC 21 (Injuries, Poisonings and 

Toxic Effects of Drugs): CroFab 

Antivenin Drug 

We received a request that CMS 

change the MS–DRG assignment for 

antivenom cases from MS–DRG 917 and 

918 (Poisoning & Toxic Effects of Drugs 

with and without MCC, respectively). 

For these MS–DRGs, we examined 

claims data from the December 2014 

update of the FY 2014 MedPAR file for 

ICD–9–CM diagnosis codes of a 

principal diagnosis 989.5 (Toxic effect 

of venom), a secondary diagnosis ICD– 

9–CM E code of E905.0 (Venomous 

snakes and lizards), and the ICD–9–CM 

procedure code of 99.16 (Injection of 

antidote), which is a non-O.R. code and 

does not impact the MS–DRG 

assignment. 

For the ICD–9–CM diagnosis code 

989.5 (Toxic effect of venom), the ICD– 

10–CM provides more detailed 

diagnosis codes for these toxic effects of 

venom cases as shown in the following 

table: 

ICD–10–CM CODE TRANSLATIONS FOR ICD–9–CM DIAGNOSIS CODE 989.5 

ICD–10–CM code Code description 

T63.001A ...................... Toxic effect of unspecified snake venom, accidental (unintentional), initial encounter. 

T63.011A ...................... Toxic effect of rattlesnake venom, accidental (unintentional) initial encounter. 

T63.021A ...................... Toxic effect of coral snake venom, accidental (unintentional), initial encounter. 

T63.031A ...................... Toxic effect of taipan venom, accidental (unintentional), initial encounter. 

T63.041A ...................... Toxic effect of cobra venom, accidental (unintentional), initial encounter. 

T63.061A ...................... Toxic effect of venom of other North and South American snake, accidental (unintentional), initial encounter. 

T63.71A ........................ Toxic effect of venom of other Australian snake, accidental (unintentional), initial encounter. 

T63.081A ...................... Toxic effect of venom of other African and Asian snake, accidental (unintentional), initial encounter. 

T63.091A ...................... Toxic effect of venom of other snake, accidental (unintentional), initial encounter. 

For the ICD–9–CM Supplementary 

Classification of External Causes of 

Injury and Poisoning code E905.0 

(Venomous snakes and lizards), ICD– 

10–CM provides more detailed 

diagnosis codes for these cases as shown 

in the following table: 

ICD–10–CM CODE TRANSLATIONS FOR ICD–9–CM CODE E905.0 

ICD–10–CM code Code description 

T63.001A ...................... Toxic effect of unspecified snake venom, accidental (unintentional), initial encounter. 

T63.011A ...................... Toxic effect of rattlesnake venom, accidental (unintentional) initial encounter. 

T63.021A ...................... Toxic effect of coral snake venom, accidental (unintentional), initial encounter. 

T63.031A ...................... Toxic effect of taipan venom, accidental (unintentional), initial encounter. 

T63.041A ...................... Toxic effect of cobra venom, accidental (unintentional), initial encounter. 

T63.061A ...................... Toxic effect of venom of other North and South American snake, accidental (unintentional), initial encounter. 

T63.71A ........................ Toxic effect of venom of other Australian snake, accidental (unintentional), initial encounter. 

T63.081A ...................... Toxic effect of venom of other African and Asian snake, accidental (unintentional), initial encounter. 

T63.091A ...................... Toxic effect of venom of other snake, accidental (unintentional), initial encounter. 

We examined claims data for 

injections for snake bites reported in 

MS–DRGs 917 and 918 from the 

December 2014 update of the FY 2014 

MedPAR file. Our findings are 

displayed in the table below. 

SNAKE BITE WITH INJECTIONS

MS–DRG Number of cases Average 

length of stay 

Average 

costs 

MS–DRG 917—All cases ............................................................................................................ 26,393 4.77 $9,983 

MS–DRG 917—Cases with principal diagnosis code 989.5 and secondary diagnosis code 

E905.0 with procedure code 99.16 (non-OR) .......................................................................... 0 0 0 

MS–DRG 918—All cases ............................................................................................................ 24,557 2.90 4,953 

MS–DRG 918—Cases with principal diagnosis code 989.5 and secondary diagnosis code 

E905.0 with procedure code 99.16 (non-OR) .......................................................................... 19 2.16 12,014 

As shown in the table above, we 

identified 19 cases of injections for 

snake bites reported in MS–DRG 918 

only. This small number of cases (19) 

does not provide justification to create 

a new MS–DRG. The cases are assigned 

to the same MS–DRG as are other types 

of poisonings and toxic effects. We were 

unable to find another MS–DRG that 

would be a more appropriate MS–DRG 

assignment for these cases based on the 

clinical nature of this condition. The 

MS–DRGs are a classification system 

intended to group together diagnoses 

and procedures with similar clinical 

characteristics and utilization of 

resources. Basing a new MS–DRG on 

such a small number of cases (19) could 

lead to distortions in the relative 

payment weights for the MS–DRG 

because several expensive cases could 

impact the overall relative payment 

weight. Having larger clinical cohesive 

groups within an MS–DRG provides 

greater stability for annual updates to 

the relative payment weights. 

Our clinical advisors reviewed the 

data, evaluated these conditions, and 

recommended that we not change the 

MS–DRG assignment for CroFab 

antivenom drug for snake bites because 

these cases are clinically similar to other 

poisoning cases currently assigned to 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24397 

MS–DRGs 917 and 918. Based on the 

findings in our data analysis and the 

recommendations of our clinical 

advisors, we are proposing to maintain 

the current assignment of diagnosis 

codes in MS–DRGs 917 and 918. We are 

not proposing any MS–DRG changes for 

cases of CroFab antivenom drugs for 

snake bites. We are inviting public 

comments on our proposal. 

7. MDC 22 (Burns): Additional Severity 

of Illness Level for MS–DRG 927 

(Extensive Burns or Full Thickness 

Burns With Mechanical Ventilation 96+ 

Hours With Skin Graft) 

We received a request to add an 

additional severity level to MS–DRG 

927 (Extensive Burns or Full Thickness 

Burns with Mechanical Ventilation 96+ 

Hours with Skin Graft). The requestor 

was concerned about payment for severe 

burn cases that used dermal 

regenerative grafts. These grafts are 

captured by procedure code 86.67 

(Dermal regenerative graft). The 

requestor stated that the total cost of 

these graft cases is significantly greater 

than the average total costs for all cases 

in MS–DRG 927. The requestor stated 

that the dermal regenerative grafts are 

used to cover large burns where donor 

skin is not available. The requestor 

stated that the grafts provide permanent 

covering of the wound and thus 

immediate closure of the wound. The 

requestor asserted that the grafts offer 

benefits such as the avoidance of 

infections. The requestor pointed out 

that MS–DRG 927 is not subdivided into 

severity of illness levels and 

recommended an additional severity 

level be added to address any payment 

issues for dermal regenerative grafts 

within MS–DRG 927. 

ICD–10–PCS provides more detailed 

and specific codes for skin grafts. The 

ICD–10–PCS codes for skin grafts 

provide specific information on the part 

of the body receiving the skin graft, the 

type of graft, and the approach used to 

apply the graft. These codes can be 

found in the table labeled ‘‘OHR 

(Replacement of Skin)’’ in the ICD–10 

MS–DRG Version 32 Definitions Manual 

available on the Internet at: http://

www.cms.gov/Medicare/Coding/ICD10/

ICD-10-MS-DRG-ConversionProject.html. As stated earlier, for the 

ICD–9–CM codes that result in greater 

than 50 ICD–10–PCS comparable code 

translations, we refer readers to Table 

6P (ICD–10–PCS Code Translations for 

Proposed MS–DRG Changes), which is 

available via the Internet on the CMS 

Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/

index.html. The table includes the MDC 

topic, the ICD–9–CM code, and the ICD– 

10–PCS code translations. In Table 

6P.2a, we show the comparable ICD–10– 

PCS codes for ICD–9–CM code 86.67 

(Dermal regenerative graft). 

We examined claims data for cases 

reported in MS–DRG 927 from the 

December 2014 update of the FY 2014 

MedPAR file. The following table shows 

our findings. 

EXTENSIVE BURNS OR FULL THICKNESS BURNS WITH MECHANICAL VENTILATION 96+ HOURS WITH SKIN GRAFT

MS–DRG Number of 

cases 

Average 

length of stay 

Average 

costs 

MS–DRG 927—All cases ............................................................................................................ 171 29.92 $113,844 

MS–DRG 927—Cases with procedure code 86.67 .................................................................... 22 33.5 146,903 

MS–DRG 927—Cases with procedure code 86.67 and 96.72 (Mechanical ventilation for 96+ 

hours) ....................................................................................................................................... 14 38.6 174,372 

MS–DRG 927—Cases with procedure code 86.67 and without 96.72 (Mechanical ventilation 

for 96+ hours) ........................................................................................................................... 8 24.6 98,482 

MS–DRG 927—All cases with MCC ........................................................................................... 131 31.51 121,519 

MS–DRG 927—All cases with CC .............................................................................................. 38 25.21 91,910 

MS–DRG 927—All cases without CC/MCC ................................................................................ 2 15.00 27,872 

As shown in the table above, we 

found a total of 171 cases in MS–DRG 

927. Of these 171 cases, there were 131 

cases with an MCC, 38 cases with a CC, 

and 2 cases without a CC or an MCC. 

The requested new severity level does 

not meet all of the criteria established in 

the FY 2008 IPPS final rule (72 FR 

47169), and described in section 

II.G.1.b. of the preamble of this 

proposed rule, that must be met to 

warrant the creation of a CC or an MCC 

subgroup within a base MS–DRG. 

Specifically, the requested new severity 

level does not meet the criterion that 

there are at least 500 cases in the CC or 

MCC subgroup. 

We also point out that the long-term 

mechanical ventilation cases are driving 

the costs to a greater extent than the 

graft cases. We found that the 22 cases 

that received a graft had average costs of 

$146,903. The 14 cases that had both 

96+ hours of mechanical ventilation and 

a graft had average costs of $174,372. 

The 8 cases that had a graft but did not 

receive 96+ hours of mechanical 

ventilation had average costs of $98,482. 

Our clinical advisors reviewed this 

issue and recommended making no MS– 

DRG updates for MS–DRG 927. They 

advised us that the dermal regenerative 

graft cases are appropriately assigned to 

the MS–DRG 927 because they are 

clinically similar to other cases within 

MS–DRG 927. Our clinical advisors also 

agreed that the cases in MS–DRG 927 do 

not meet the established criterion for 

creating a new severity level. 

Based on the findings of our data 

analysis, the fact that MS–DRG 927 does 

not meet the criterion for the creation of 

an additional severity level, and the 

recommendations of our clinical 

advisors, we are not proposing to create 

a new severity level for MS–DRG 927. 

We are proposing to maintain the 

current MS–DRG 927 structure without 

additional severity levels. We are 

inviting public comments on our 

proposal. 

8. Proposed Medicare Code Editor 

(MCE) Changes 

The Medicare Code Editor (MCE) is a 

software program that detects and 

reports errors in the coding of Medicare 

claims data. Patient diagnoses, 

procedure(s), and demographic 

information are entered into the 

Medicare claims processing systems and 

are subjected to a series of automated 

screens. The MCE screens are designed 

to identify cases that require further 

review before classification into an MS– 

DRG. 

As discussed in section II.G.1.a. of the 

preamble of this proposed rule, CMS 

prepared the ICD–10 MS–DRGs Version 

32 based on the FY 2015 MS–DRGs 

(Version 32) that we finalized in the FY 

2015 IPPS/LTCH PPS final rule. In 

November 2014, we made available a 

Definitions Manual of the ICD–10 MS– 

DRGs Version 32 and the MCE Version 

32 on the ICD–10 MS–DRG Conversion 

Project Web site at: http://www.cms.gov/ 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24398 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html. We also 

prepared a document that described the 

changes made between Version 31–R to 

Version 32 to help facilitate a review of 

the ICD–10 MS–DRGs logic. We 

produced mainframe and computer 

software for ICD–10 MS–DRGs Version 

32 and MCE Version 32, which was 

made available to the public in January 

2015. Information on ordering the 

mainframe and computer software 

through NTIS was made available on the 

CMS Web site at: http://www.cms.gov/

Medicare/Coding/ICD10/ICD-10-MSDRG-Conversion-Project.html under the 

‘‘Related Links’’ section. We encouraged 

the public to submit to CMS any 

comments on areas where they believed 

the ICD–10 MS–DRG GROUPER and 

MCE did not accurately reflect the logic 

and edits found in the ICD–9–CM MS– 

DRG GROUPER and the MCE. 

For FY 2016, in order to be consistent 

with the ICD–9–CM MS–DRG 

GROUPER and MCE Version 32, we are 

proposing to add the ICD–10–PCS codes 

listed in the table below to the ICD–10 

MCE Version 33 of the ‘‘Manifestation 

codes not allowed as principal 

diagnosis’’ edit. Under the MCE, 

manifestation codes describe the 

‘‘manifestation’’ of an underlying 

disease, not the disease itself. Because 

these codes do not describe the disease 

itself, they should not be used as 

principal diagnoses. 

ICD–10–CM CODES PROPOSED TO BE ADDED TO THE VERSION 33 MCE ‘‘MANIFESTATION CODES NOT ALLOWED AS

PRINCIPAL DIAGNOSIS’’ EDIT

ICD–10–CM code Code description 

D75.81 .......................... Myelofibrosis. 

E08.00 .......................... Diabetes mellitus due to underlying condition with hyperosmolarity without nonketotic hyperglycemic-hyperosmolar 

coma (NKHHC). 

E08.01 .......................... Diabetes mellitus due to underlying condition with hyperosmolarity with coma. 

E08.10 .......................... Diabetes mellitus due to underlying condition with ketoacidosis without coma. 

E08.11 .......................... Diabetes mellitus due to underlying condition with ketoacidosis with coma. 

E08.21 .......................... Diabetes mellitus due to underlying condition with diabetic nephropathy. 

E08.22 .......................... Diabetes mellitus due to underlying condition with diabetic chronic kidney disease. 

E08.29 .......................... Diabetes mellitus due to underlying condition with other diabetic kidney complication. 

E08.311 ........................ Diabetes mellitus due to underlying condition with unspecified diabetic retinopathy with macular edema. 

E08.319 ........................ Diabetes mellitus due to underlying condition with unspecified diabetic retinopathy without macular edema. 

E08.321 ........................ Diabetes mellitus due to underlying condition with mild nonproliferative diabetic retinopathy with macular edema. 

E08.329 ........................ Diabetes mellitus due to underlying condition with mild nonproliferative diabetic retinopathy without macular edema. 

E08.331 ........................ Diabetes mellitus due to underlying condition with moderate nonproliferative diabetic retinopathy with macular edema. 

E08.339 ........................ Diabetes mellitus due to underlying condition with moderate nonproliferative diabetic retinopathy without macular 

edema. 

E08.341 ........................ Diabetes mellitus due to underlying condition with severe nonproliferative diabetic retinopathy with macular edema. 

E08.349 ........................ Diabetes mellitus due to underlying condition with severe nonproliferative diabetic retinopathy without macular edema. 

E08.351 ........................ Diabetes mellitus due to underlying condition with proliferative diabetic retinopathy with macular edema. 

E08.359 ........................ Diabetes mellitus due to underlying condition with proliferative diabetic retinopathy without macular edema. 

E08.36 .......................... Diabetes mellitus due to underlying condition with diabetic cataract. 

E08.39 .......................... Diabetes mellitus due to underlying condition with other diabetic ophthalmic complication. 

E08.40 .......................... Diabetes mellitus due to underlying condition with diabetic neuropathy, unspecified. 

E08.41 .......................... Diabetes mellitus due to underlying condition with diabetic mononeuropathy. 

E08.42 .......................... Diabetes mellitus due to underlying condition with diabetic polyneuropathy. 

E08.43 .......................... Diabetes mellitus due to underlying condition with diabetic autonomic (poly)neuropathy. 

E08.44 .......................... Diabetes mellitus due to underlying condition with diabetic amyotrophy. 

E08.49 .......................... Diabetes mellitus due to underlying condition with other diabetic neurological complication. 

E08.51 .......................... Diabetes mellitus due to underlying condition with diabetic peripheral angiopathy without gangrene. 

E08.52 .......................... Diabetes mellitus due to underlying condition with diabetic peripheral angiopathy with gangrene. 

E08.59 .......................... Diabetes mellitus due to underlying condition with other circulatory complications. 

E08.610 ........................ Diabetes mellitus due to underlying condition with diabetic neuropathic arthropathy. 

E08.618 ........................ Diabetes mellitus due to underlying condition with other diabetic arthropathy. 

E08.620 ........................ Diabetes mellitus due to underlying condition with diabetic dermatitis. 

E08.621 ........................ Diabetes mellitus due to underlying condition with foot ulcer. 

E08.622 ........................ Diabetes mellitus due to underlying condition with other skin ulcer. 

E08.628 ........................ Diabetes mellitus due to underlying condition with other skin complications. 

E08.630 ........................ Diabetes mellitus due to underlying condition with periodontal disease. 

E08.638 ........................ Diabetes mellitus due to underlying condition with other oral complications. 

E08.641 ........................ Diabetes mellitus due to underlying condition with hypoglycemia with coma. 

E08.649 ........................ Diabetes mellitus due to underlying condition with hypoglycemia without coma. 

E08.65 .......................... Diabetes mellitus due to underlying condition with hyperglycemia. 

E08.69 .......................... Diabetes mellitus due to underlying condition with other specified complication. 

E08.8 ............................ Diabetes mellitus due to underlying condition with unspecified complications. 

E08.9 ............................ Diabetes mellitus due to underlying condition without complications. 

We are inviting public comment on 

our proposal to add the above list of 

ICD–10–CM diagnosis codes to the 

‘‘Manifestation codes not allowed as 

principal diagnosis’’ edit in the FY 2016 

ICD–10 MCE Version 33. 

We also are proposing to revise the 

language describing the ‘‘Procedure 

inconsistent with LOS (Length of stay)’’ 

edit which lists ICD–10–PCS code 

5A1955Z (Respiratory ventilation, 

greater than 96 consecutive hours), 

effective for the FY 2016 ICD–10 MCE 

Version 33. Currently, in Version 32 of 

the ICD–10 MCE, the language 

describing this ‘‘Procedure inconsistent 

with LOS (Length of stay)’’ edit states: 

‘‘The following procedure should only 


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be coded on claims with a length of stay 

of four days or greater.’’ Because the 

code description of the ICD–10–PCS 

code is for ventilation that occurs 

greater than 96 hours, we are proposing 

to revise the language for the edit to 

read: ‘‘The following procedure code 

should only be coded on claims with a 

length of stay greater than 4 days.’’ This 

proposed revision would clarify the 

intent of this MCE edit. We are inviting 

public comments on our proposal. 

9. Proposed Changes to Surgical 

Hierarchies 

Some inpatient stays entail multiple 

surgical procedures, each one of which, 

occurring by itself, could result in 

assignment of the case to a different 

MS–DRG within the MDC to which the 

principal diagnosis is assigned. 

Therefore, it is necessary to have a 

decision rule within the GROUPER by 

which these cases are assigned to a 

single MS–DRG. The surgical hierarchy, 

an ordering of surgical classes from 

most resource-intensive to least 

resource-intensive, performs that 

function. Application of this hierarchy 

ensures that cases involving multiple 

surgical procedures are assigned to the 

MS–DRG associated with the most 

resource-intensive surgical class. 

Because the relative resource intensity 

of surgical classes can shift as a function 

of MS–DRG reclassification and 

recalibrations, for FY 2016, we reviewed 

the surgical hierarchy of each MDC, as 

we have for previous reclassifications 

and recalibrations, to determine if the 

ordering of classes coincides with the 

intensity of resource utilization. 

A surgical class can be composed of 

one or more MS–DRGs. For example, in 

MDC 11, the surgical class ‘‘kidney 

transplant’’ consists of a single MS–DRG 

(MS–DRG 652) and the class ‘‘major 

bladder procedures’’ consists of three 

MS–DRGs (MS–DRGs 653, 654, and 

655). Consequently, in many cases, the 

surgical hierarchy has an impact on 

more than one MS–DRG. The 

methodology for determining the most 

resource-intensive surgical class 

involves weighting the average 

resources for each MS–DRG by 

frequency to determine the weighted 

average resources for each surgical class. 

For example, assume surgical class A 

includes MS–DRGs 001 and 002 and 

surgical class B includes MS–DRGs 003, 

004, and 005. Assume also that the 

average costs of MS–DRG 001 are higher 

than that of MS–DRG 003, but the 

average costs of MS–DRGs 004 and 005 

are higher than the average costs of MS– 

DRG 002. To determine whether 

surgical class A should be higher or 

lower than surgical class B in the 

surgical hierarchy, we would weigh the 

average costs of each MS–DRG in the 

class by frequency (that is, by the 

number of cases in the MS–DRG) to 

determine average resource 

consumption for the surgical class. The 

surgical classes would then be ordered 

from the class with the highest average 

resource utilization to that with the 

lowest, with the exception of ‘‘other 

O.R. procedures’’ as discussed below. 

This methodology may occasionally 

result in assignment of a case involving 

multiple procedures to the lowerweighted MS–DRG (in the highest, most 

resource-intensive surgical class) of the 

available alternatives. However, given 

that the logic underlying the surgical 

hierarchy provides that the GROUPER 

search for the procedure in the most 

resource-intensive surgical class, in 

cases involving multiple procedures, 

this result is sometimes unavoidable. 

We note that, notwithstanding the 

foregoing discussion, there are a few 

instances when a surgical class with a 

lower average cost is ordered above a 

surgical class with a higher average cost. 

For example, the ‘‘other O.R. 

procedures’’ surgical class is uniformly 

ordered last in the surgical hierarchy of 

each MDC in which it occurs, regardless 

of the fact that the average costs for the 

MS–DRG or MS–DRGs in that surgical 

class may be higher than those for other 

surgical classes in the MDC. The ‘‘other 

O.R. procedures’’ class is a group of 

procedures that are only infrequently 

related to the diagnoses in the MDC, but 

are still occasionally performed on 

patients with cases assigned to the MDC 

with these diagnoses. Therefore, 

assignment to these surgical classes 

should only occur if no other surgical 

class more closely related to the 

diagnoses in the MDC is appropriate. 

A second example occurs when the 

difference between the average costs for 

two surgical classes is very small. We 

have found that small differences 

generally do not warrant reordering of 

the hierarchy because, as a result of 

reassigning cases on the basis of the 

hierarchy change, the average costs are 

likely to shift such that the higherordered surgical class has lower average 

costs than the class ordered below it. 

Based on the changes that we are 

proposing to make for FY 2016, as 

discussed in section II.G.3.e. of the 

preamble of this FY 2016 IPPS/LTCH 

PPS proposed rule, we are proposing to 

revise the surgical hierarchy for MDC 5 

(Diseases and Disorders of the 

Circulatory System). Specifically, we are 

proposing to delete MS–DRG 237 (Major 

Cardiovascular Procedures with MCC) 

and MS–DRG 238 (Major Cardiovascular 

Procedures without MCC) from the 

surgical hierarchy. We are proposing to 

sequence proposed new MS–DRG 268 

(Aortic and Heart Assist Procedures 

Except Pulsation Balloon with MCC) 

and proposed new MS–DRG 269 (Aortic 

and Heart Assist Procedures Except 

Pulsation Balloon without MCC) above 

proposed new MS–DRG 270 (Other 

Major Cardiovascular Procedures with 

MCC), proposed new MS–DRG 271 

(Other Major Cardiovascular Procedures 

with CC), and proposed new MS–DRG 

272 (Other Major Cardiovascular 

Procedures without CC/MCC). We are 

proposing to sequence proposed new 

MS–DRGs 270, 271, and 272 above MS– 

DRG 239 (Amputation for Circulatory 

System Disorders Except Upper Limb & 

Toe with MCC). In addition, we are 

proposing to sequence proposed new 

MS–DRG 273 (Percutaneous 

Intracardiac Procedures with MCC) and 

proposed new MS–DRG 274 

(Percutaneous Intracardiac Procedures 

without MCC) above MS–DRG 246 

(Percutaneous Cardiovascular Procedure 

with Drug-eluting Stent with MCC or 4+ 

Vessels/Stents). 

We are inviting public comments on 

our proposals. 

10. Proposed Changes to the MS–DRG 

Diagnosis Codes for FY 2016 

a. Major Complications or Comorbidities 

(MCCs) and Complications or 

Comorbidities (CC) Severity Levels for 

FY 2016 

A complete updated MCC, CC, and 

Non-CC Exclusion List is available via 

the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/index.html as 

follows: 

• Table 6I (Complete MCC list); 

• Table 6J (Complete CC list); and 

• Table 6K (Complete list of CC 

Exclusions). 

b. Coronary Atherosclerosis Due to 

Calcified Coronary Lesion 

We received a request that we change 

the severity levels for ICD–9–CM 

diagnosis codes 414.2 (Chronic total 

occlusion of coronary artery) and 414.4 

(Coronary atherosclerosis due to 

calcified coronary lesion) from non-CCs 

to MCCs. The ICD–10–CM codes for 

these diagnoses are I25.82 (Chronic total 

occlusion of coronary artery) and I25.84 

(Coronary atherosclerosis due to 

calcified coronary lesion), respectively, 

and both of these codes are currently 

classified as non-CCs. 

This issue was previously discussed 

in the FY 2014 IPPS/LTCH PPS 

proposed rule and final rule (78 FR 

27522 and 78 FR 50541 through 50542, 


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respectively), and the FY 2015 IPPS/

LTCH PPS proposed rule and final rule 

(79 FR 28018 and 28019 and 79 FR 

49903 and 49904, respectively). 

We examined claims data from the 

December 2014 update of the FY 2014 

MedPAR file for ICD–9–CM diagnosis 

codes 414.2 and 414.4. The following 

table shows our findings. 

SDX SDX description CC 

level 

Cnt 1 Cnt 1 

impact 

Cnt 2 Cnt 2 

impact 

Cnt 3 Cnt 3 

impact 

414.2 .................. Chronic total occlusion of coronary 

artery.

Non-CC 14,655 1.393 21,222 2.098 20,615 3.046 

414.4 .................. Coronary atherosclerosis due to 

calcified coronary 

lesion.

Non-CC 1,752 1.412 3,238 2.148 3,244 3.053 

We ran the data using the criteria 

described in the FY 2008 IPPS final rule 

with comment period (72 FR 47169) to 

determine severity levels for procedures 

in MS–DRGs. The C1 value reflects a 

patient with no other secondary 

diagnosis or with all other secondary 

diagnoses that are non-CCs. The C2 

value reflects a patient with at least one 

other secondary diagnosis that is a CC, 

but none that is an MCC. The C3 value 

reflects a patient with at least one other 

secondary diagnosis that is an MCC. 

The table above shows that the C1 

finding is 1.393 for ICD–9–CM diagnosis 

code 414.2 and the C1 finding is 1.412 

for ICD–9–CM diagnosis code 414.4. A 

value close to 1.0 in the C1 field 

suggests that the diagnosis produces the 

same expected value as a non-CC. A 

value close to 2.0 suggests the condition 

is more like a CC than a non-CC, but not 

as significant in resource usage as an 

MCC. A value close to 3.0 suggests that 

the condition is expected to consume 

resources more similar to an MCC than 

a CC or a non-CC. The C2 finding was 

2.098 for ICD–9–CM diagnosis code 

414.2, and the C2 finding was 2.148 for 

ICD–9–CM diagnosis code 414.4. A C2 

value close to 2.0 suggests the condition 

is more like a CC than a non-CC, but not 

as significant in resource usage as an 

MCC when there is at least one other 

secondary diagnosis that is a CC but 

none that is an MCC. While the C1 value 

of 1.393 for ICD–9–CM diagnosis code 

414.2 and the C1 value of 1.412 for ICD– 

9–CM diagnosis code 414.4 are above 

the 1.0 value for a non-CC, these values 

do not support the reclassification of 

diagnosis codes 414.2 and 414.4 to 

MCCs. As stated earlier, a value close to 

3.0 suggests the condition is expected to 

consume resources more similar to an 

MCC than a CC or a non-CC. The C2 

finding of 2.098 for ICD–9–CM 

diagnosis code 414.2 and the C2 finding 

of 2.148 for ICD–9–CM diagnosis code 

414.4 also do not support reclassifying 

these diagnosis codes to MCCs. 

Our clinical advisors reviewed the 

data and evaluated these conditions. 

They recommended that we not change 

the severity level of diagnosis codes 

414.2 and 414.4 from a non-CC to an 

MCC. Our clinical advisors do not 

believe that these diagnoses would 

increase the severity of illness level of 

patients. Considering the C1 and C2 

ratings of both diagnosis codes 414.2 

and 414.4 and the input from our 

clinical advisors, we are not proposing 

to reclassify conditions represented by 

diagnosis codes 414.2 and 414.4 to 

MCCs. We are proposing to maintain 

both of these conditions as non-CCs. As 

stated earlier, the equivalent ICD–10– 

CM codes for these conditions are codes 

I25.82 and I25.84, respectively. 

Therefore, based on the data and 

clinical analysis, we are proposing to 

maintain ICD–10–CM diagnosis codes 

I25.82 and I25.84 as non-CCs. We are 

inviting public comments on our 

proposals. 

c. Hydronephrosis 

Some ICD–10–CM diagnosis codes 

express conditions that are normally 

coded in ICD–9–CM using two or more 

ICD–9–CM diagnosis codes. CMS’ goal 

in developing the ICD–10 MS–DRGs 

was to ensure that a patient case is 

assigned to the same MS–DRG, 

regardless of whether the patient record 

were to be coded in ICD–9–CM or ICD– 

10–CM/PCS. When one of the ICD–10– 

CM combination codes is used as a 

principal diagnosis, the cluster of ICD– 

9–CM codes that would be coded on an 

ICD–9–CM record was evaluated. If one 

of the ICD–9–CM codes in the cluster is 

a CC or an MCC, the single ICD–10–CM 

combination code used as a principal 

diagnosis also must imply that the CC 

or MCC is present. Appendix J of the 

ICD–10 MS–DRG Definitions Manual 

Version 32 includes two lists. Part 1 is 

the list of principal diagnosis codes 

where the ICD–10–CM code is its own 

MCC. Part 2 is the list of principal 

diagnosis codes where the ICD–10–CM 

code is its own CC. Appendix J of the 

ICD–10 MS–DRG Definitions Manual 

Version 32 is available via the CMS Web 

site at: http://www.cms.gov/Medicare/

Coding/ICD10/ICD-10-MS-DRGConversion-Project.html. 

We received a request that the ICD– 

10–CM combination codes for 

hydronephrosis due to ureteral stricture 

and urinary stone (N13.1 and N13.2) be 

flagged as principal diagnoses that can 

act as their own CC for MS–DRG 

grouping purposes. 

In ICD–9–CM, code 591 

(Hydronephrosis) is classified as a CC. 

In ICD–10–CM, hydronephrosis is 

reported with a combination code if the 

hydronephrosis is due to a ureteral 

stricture or urinary stone obstruction of 

N13.1 (Hydronephrosis with ureteral 

stricture, not elsewhere classified) and 

N13.2 (Hydronephrosis with renal and 

ureteral calculous obstruction). In ICD– 

10–CM, these two codes (N13.1 and 

N13.2) are classified as CCs, but these 

codes are not recognized as principal 

diagnoses that act as their own CC (they 

are not included in the Appendix J of 

the ICD–10 MS–DRG Definitions 

Manual Version 32). 

We agree with the requestor that ICD– 

10–CM diagnosis codes N13.1 and 

N13.2 should be flagged as principal 

diagnosis codes that can act as their 

own CC for MS–DRG grouping 

purposes. Therefore, we are proposing 

that diagnosis codes N13.1 and N13.2 be 

added to the list of principal diagnoses 

that act as their own CC in Appendix J 

of the ICD–10 MS–DRG Definitions 

Manual Version 32. We are inviting 

public comments on our proposal. 

11. Proposed Complications or 

Comorbidity (CC) Exclusions List for FY 

2016 

a. Background of the CC List and the CC 

Exclusions List 

Under the IPPS MS–DRG 

classification system, we have 

developed a standard list of diagnoses 

that are considered CCs. Historically, we 


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4We refer readers to the FY 1989 final rule (53 

FR 38485, September 30, 1988) for the revision 

made for the discharges occurring in FY 1989; the 

FY 1990 final rule (54 FR 36552, September 1, 

1989) for the FY 1990 revision; the FY 1991 final 

rule (55 FR 36126, September 4, 1990) for the FY 

1991 revision; the FY 1992 final rule (56 FR 43209, 

August 30, 1991) for the FY 1992 revision; the FY 

1993 final rule (57 FR 39753, September 1, 1992) 

for the FY 1993 revision; the FY 1994 final rule (58 

FR 46278, September 1, 1993) for the FY 1994 

revisions; the FY 1995 final rule (59 FR 45334, 

September 1, 1994) for the FY 1995 revisions; the 

FY 1996 final rule (60 FR 45782, September 1, 

1995) for the FY 1996 revisions; the FY 1997 final 

rule (61 FR 46171, August 30, 1996) for the FY 1997 

revisions; the FY 1998 final rule (62 FR 45966, 

August 29, 1997) for the FY 1998 revisions; the FY 

1999 final rule (63 FR 40954, July 31, 1998) for the 

FY 1999 revisions; the FY 2001 final rule (65 FR 

47064, August 1, 2000) for the FY 2001 revisions; 

the FY 2002 final rule (66 FR 39851, August 1, 

2001) for the FY 2002 revisions; the FY 2003 final 

rule (67 FR 49998, August 1, 2002) for the FY 2003 

revisions; the FY 2004 final rule (68 FR 45364, 

August 1, 2003) for the FY 2004 revisions; the FY 

2005 final rule (69 FR 49848, August 11, 2004) for 

the FY 2005 revisions; the FY 2006 final rule (70 

FR 47640, August 12, 2005) for the FY 2006 

revisions; the FY 2007 final rule (71 FR 47870) for 

the FY 2007 revisions; the FY 2008 final rule (72 

FR 47130) for the FY 2008 revisions; the FY 2009 

final rule (73 FR 48510); the FY 2010 final rule (74 

FR 43799); the FY 2011 final rule (75 FR 50114); 

the FY 2012 final rule (76 FR 51542); the FY 2013 

final rule (77 FR 53315); the FY 2014 final rule (78 

FR 50541), and the FY 2015 final rule (79 FR 

49905). In the FY 2000 final rule (64 FR 41490, July 

30, 1999), we did not modify the CC Exclusions List 

because we did not make any changes to the ICD– 

9–CM codes for FY 2000. 

developed this list using physician 

panels that classified each diagnosis 

code based on whether the diagnosis, 

when present as a secondary condition, 

would be considered a substantial 

complication or comorbidity. A 

substantial complication or comorbidity 

was defined as a condition that, because 

of its presence with a specific principal 

diagnosis, would cause an increase in 

the length of stay by at least 1 day in 

at least 75 percent of the patients. 

However, depending on the principal 

diagnosis of the patient, some diagnoses 

on the basic list of complications and 

comorbidities may be excluded if they 

are closely related to the principal 

diagnosis. In FY 2008, we evaluated 

each diagnosis code to determine its 

impact on resource use and to 

determine the most appropriate CC 

subclassification (non-CC, CC, or MCC) 

assignment. We refer readers to sections 

II.D.2. and 3. of the preamble of the FY 

2008 IPPS final rule with comment 

period for a discussion of the refinement 

of CCs in relation to the MS–DRGs we 

adopted for FY 2008 (72 FR 47152 

through 47171). 

b. Proposed CC Exclusions List for FY 

2016 

In the September 1, 1987 final notice 

(52 FR 33143) concerning changes to the 

DRG classification system, we modified 

the GROUPER logic so that certain 

diagnoses included on the standard list 

of CCs would not be considered valid 

CCs in combination with a particular 

principal diagnosis. We created the CC 

Exclusions List for the following 

reasons: (1) To preclude coding of CCs 

for closely related conditions; (2) to 

preclude duplicative or inconsistent 

coding from being treated as CCs; and 

(3) to ensure that cases are appropriately 

classified between the complicated and 

uncomplicated DRGs in a pair. As we 

indicated above, we developed a list of 

diagnoses, using physician panels, to 

include those diagnoses that, when 

present as a secondary condition, would 

be considered a substantial 

complication or comorbidity. In 

previous years, we have made changes 

to the list of CCs, either by adding new 

CCs or deleting CCs already on the list. 

In the May 19, 1987 proposed notice 

(52 FR 18877) and the September 1, 

1987 final notice (52 FR 33154), we 

explained that the excluded secondary 

diagnoses were established using the 

following five principles: 

• Chronic and acute manifestations of 

the same condition should not be 

considered CCs for one another; 

• Specific and nonspecific (that is, 

not otherwise specified (NOS)) 

diagnosis codes for the same condition 

should not be considered CCs for one 

another; 

• Codes for the same condition that 

cannot coexist, such as partial/total, 

unilateral/bilateral, obstructed/

unobstructed, and benign/malignant, 

should not be considered CCs for one 

another; 

• Codes for the same condition in 

anatomically proximal sites should not 

be considered CCs for one another; and 

• Closely related conditions should 

not be considered CCs for one another. 

The creation of the CC Exclusions List 

was a major project involving hundreds 

of codes. We have continued to review 

the remaining CCs to identify additional 

exclusions and to remove diagnoses 

from the master list that have been 

shown not to meet the definition of a 

CC.4

The ICD–10 MS–DRGs Version 32 CC 

Exclusion List is included as Appendix 

C in the Definitions Manual available 

via the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD10/ICD-10-MS-DRG-ConversionProject.html. 

For FY 2016, we are not proposing 

any changes to the CC Exclusion List. 

Because we are not proposing any 

changes to the ICD–10 MS–DRGs CC 

Exclusion List for FY 2016, we are not 

publishing Table 6G (Additions to the 

CC Exclusion List) or Table 6H 

(Deletions from the CC Exclusion List). 

We have developed Table 6K (Complete 

List of CC Exclusions), which is 

available only via the Internet on the 

CMS Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/

index.html. Because of the length of 

Table 6K, we are not publishing it in the 

Addendum to this proposed rule. Each 

of the secondary diagnosis codes for 

which there is an exclusion is listed in 

Part 1 of Table 6K. Each of these 

secondary diagnosis codes is indicated 

as a CC or an MCC. If the CC or MCC 

is allowed with all principal diagnoses, 

the phrase ‘‘NoExcl’’ (for no exclusions) 

follows the CC/MCC indicator. 

Otherwise, a link is given to a collection 

of diagnosis codes which, when used as 

the principal diagnosis, will cause the 

CC or MCC to be considered as only a 

non-CC. Part 2 of Table 6K lists codes 

that are assigned as an MCC only for 

patients discharged alive. Otherwise, 

the codes are assigned as a non-CC. 

A complete updated MCC, CC, and 

Non-CC Exclusions List is available via 

the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/index.html. 

Because there are no proposed new, 

revised, or deleted ICD–10–CM 

diagnosis codes for FY 2016, we have 

not developed Table 6A (New Diagnosis 

Codes), Table 6C (Invalid Diagnosis 

Codes), or Table 6E (Revised Diagnosis 

Code Titles), for this proposed rule and 

they are not published as part of this 

proposed rule. We have developed 

Table 6B (New Procedure Codes) for 

new ICD–10–PCS codes which will be 

implemented on October 1, 2015. 

Because there are no proposed revised 

or deleted procedure codes for FY 2016, 

we have not developed Table 6D 

(Invalid Procedure Codes) or Table 6F 

(Revised Procedure Codes). 

We are not proposing any additions or 

deletions to the MS–DRG MCC List for 

FY 2016 nor any additions or deletions 

to the MS–DRG CC List for FY 2016. 

Therefore, for this proposed rule, we 

have not developed Tables 6I.1 

(Additions to the MCC List), 6I.2 

(Deletions to the MCC List), 6J.1 

(Additions to the CC List), and 6J.2 

(Deletions to the CC List), and they are 

not published as part of this proposed 

rule. We have developed Table 6M.1 

(Additions to Principal Diagnosis Is Its 

Own CC) to show the two proposed 

additions to this list for the two 

principal diagnosis codes acting as their 

own CC. 

The complete documentation of the 

ICD–10 MS–DRG Version 32 GROUPER 

logic, including the current CC 


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5The original list of the ICD–9–CM procedure 

codes for the procedures we consider nonextensive 

procedures, if performed with an unrelated 

principal diagnosis, was published in Table 6C in 

section IV. of the Addendum to the FY 1989 final 

rule (53 FR 38591). As part of the FY 1991 final rule 

(55 FR 36135), the FY 1992 final rule (56 FR 43212), 

the FY 1993 final rule (57 FR 23625), the FY 1994 

final rule (58 FR 46279), the FY 1995 final rule (59 

FR 45336), the FY 1996 final rule (60 FR 45783), 

the FY 1997 final rule (61 FR 46173), and the FY 

1998 final rule (62 FR 45981), we moved several 

other procedures from DRG 468 to DRG 477, and 

some procedures from DRG 477 to DRG 468. No 

procedures were moved in FY 1999, as noted in the 

final rule (63 FR 40962), in the FY 2000 (64 FR 

41496), in the FY 2001 (65 FR 47064), or in the FY 

2002 (66 FR 39852). In the FY 2003 final rule (67 

FR 49999), we did not move any procedures from 

DRG 477. However, we did move procedure codes 

from DRG 468 and placed them in more clinically 

coherent DRGs. In the FY 2004 final rule (68 FR 

45365), we moved several procedures from DRG 

468 to DRGs 476 and 477 because the procedures 

are nonextensive. In the FY 2005 final rule (69 FR 

48950), we moved one procedure from DRG 468 to 

477. In addition, we added several existing 

procedures to DRGs 476 and 477. In FY 2006 (70 

FR 47317), we moved one procedure from DRG 468 

and assigned it to DRG 477. In FY 2007, we moved 

one procedure from DRG 468 and assigned it to 

DRGs 479, 553, and 554. In FYs 2008, 2009, 2010, 

2011, 2012, 2013, 2014, and 2015, no procedures 

were moved, as noted in the FY 2008 final rule with 

comment period (72 FR 46241), in the FY 2009 final 

rule (73 FR 48513), in the FY 2010 final rule (74 

FR 43796), in the FY 2011 final rule (75 FR 50122), 

in the FY 2012 final rule (76 FR 51549), in the FY 

2013 final rule (77 FR 53321), in the FY 2014 final 

rule (78 FR 50545); and in the FY 2015 final rule 

(79 FR 49906). 

Exclusions List, is available via the 

Internet on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/ICD10/

ICD-10-MS-DRG-ConversionProject.html. The complete 

documentation of the ICD–10 MS–DRG 

GROUPER logic will be available on the 

CMS Acute Inpatient PPS Web page 

after the issuance of the final rule at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/index.html. 

12. Review of Procedure Codes in MS– 

DRGs 981 Through 983, 984 Through 

986, and 987 Through 989 

Each year, we review cases assigned 

to former CMS DRG 468 (Extensive O.R. 

Procedure Unrelated to Principal 

Diagnosis), CMS DRG 476 (Prostatic 

O.R. Procedure Unrelated to Principal 

Diagnosis), and CMS DRG 477 

(Nonextensive O.R. Procedure Unrelated 

to Principal Diagnosis) to determine 

whether it would be appropriate to 

change the procedures assigned among 

these CMS DRGs. Under the MS–DRGs 

that we adopted for FY 2008, CMS DRG 

468 was split three ways and became 

MS–DRGs 981, 982, and 983 (Extensive 

O.R. Procedure Unrelated to Principal 

Diagnosis with MCC, with CC, and 

without CC/MCC, respectively). CMS 

DRG 476 became MS–DRGs 984, 985, 

and 986 (Prostatic O.R. Procedure 

Unrelated to Principal Diagnosis with 

MCC, with CC, and without CC/MCC, 

respectively). CMS DRG 477 became 

MS–DRGs 987, 988, and 989 

(Nonextensive O.R. Procedure Unrelated 

to Principal Diagnosis with MCC, with 

CC, and without CC/MCC, respectively). 

MS–DRGs 981 through 983, 984 

through 986, and 987 through 989 

(formerly CMS DRGs 468, 476, and 477, 

respectively) are reserved for those cases 

in which none of the O.R. procedures 

performed are related to the principal 

diagnosis. These MS–DRGs are intended 

to capture atypical cases, that is, those 

cases not occurring with sufficient 

frequency to represent a distinct, 

recognizable clinical group. MS–DRGs 

984 through 986 (previously CMS DRG 

476) are assigned to those discharges in 

which one or more of the following 

prostatic procedures are performed and 

are unrelated to the principal diagnosis: 

• 60.0 (Incision of prostate); 

• 60.12 (Open biopsy of prostate); 

• 60.15 (Biopsy of periprostatic 

tissue); 

• 60.18 (Other diagnostic procedures 

on prostate and periprostatic tissue); 

• 60.21 (Transurethral 

prostatectomy); 

• 60.29 (Other transurethral 

prostatectomy); 

• 60.61 (Local excision of lesion of 

prostate); 

• 60.69 (Prostatectomy, not elsewhere 

classified); 

• 60.81 (Incision of periprostatic 

tissue); 

• 60.82 (Excision of periprostatic 

tissue); 

• 60.93 (Repair of prostate); 

• 60.94 (Control of (postoperative) 

hemorrhage of prostate); 

• 60.95 (Transurethral balloon 

dilation of the prostatic urethra); 

• 60.96 (Transurethral destruction of 

prostate tissue by microwave 

thermotherapy); 

• 60.97 (Other transurethral 

destruction of prostate tissue by other 

thermotherapy); and 

• 60.99 (Other operations on 

prostate). 

All remaining O.R. procedures are 

assigned to MS–DRGs 981 through 983 

and 987 through 989, with MS–DRGs 

987 through 989 assigned to those 

discharges in which the only procedures 

performed are nonextensive procedures 

that are unrelated to the principal 

diagnosis.5

Our review of MedPAR claims data 

showed that there are no cases that 

merited movement or should logically 

be assigned to any of the other MDCs. 

Therefore, for FY 2016, we are not 

proposing to change the procedures 

assigned among these MS–DRGs. 

We are inviting public comments on 

our proposal. 

a. Moving Procedure Codes From MS– 

DRGs 981 Through 983 or MS–DRGs 

987 Through 989 Into MDCs 

We annually conduct a review of 

procedures producing assignment to 

MS–DRGs 981 through 983 (Extensive 

O.R. procedure unrelated to principal 

diagnosis with MCC, with CC, and 

without CC/MCC, respectively) or MS– 

DRGs 987 through 989 (Nonextensive 

O.R. procedure unrelated to principal 

diagnosis with MCC, with CC, and 

without CC/MCC, respectively) on the 

basis of volume, by procedure, to see if 

it would be appropriate to move 

procedure codes out of these MS–DRGs 

into one of the surgical MS–DRGs for 

the MDC into which the principal 

diagnosis falls. The data are arrayed in 

two ways for comparison purposes. We 

look at a frequency count of each major 

operative procedure code. We also 

compare procedures across MDCs by 

volume of procedure codes within each 

MDC. 

We identify those procedures 

occurring in conjunction with certain 

principal diagnoses with sufficient 

frequency to justify adding them to one 

of the surgical MS–DRGs for the MDC in 

which the diagnosis falls. As noted 

above, there are no cases that merited 

movement or that should logically be 

assigned to any of the other MDCs. 

Therefore, for FY 2016, we are not 

proposing to remove any procedures 

from MS–DRGs 981 through 983 or MS– 

DRGs 987 through 989 into one of the 

surgical MS–DRGs for the MDC into 

which the principal diagnosis is 

assigned. 

We are inviting public comments on 

our proposal. 

b. Reassignment of Procedures Among 

MS DRGs 981 Through 983, 984 

Through 986, and 987 Through 989 

(1) Annual Review of Procedures 

We also annually review the list of 

ICD–9–CM procedures that, when in 

combination with their principal 

diagnosis code, result in assignment to 

MS–DRGs 981 through 983, 984 through 

986 (Prostatic O.R. procedure unrelated 

to principal diagnosis with MCC, with 

CC, or without CC/MCC, respectively), 

and 987 through 989, to ascertain 

whether any of those procedures should 

be reassigned from one of these three 

MS DRGs to another of the three MS– 

DRGs based on average costs and the 

length of stay. We look at the data for 

trends such as shifts in treatment 

practice or reporting practice that would 

make the resulting MS–DRG assignment 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24403 

illogical. If we find these shifts, we 

would propose to move cases to keep 

the MS–DRGs clinically similar or to 

provide payment for the cases in a 

similar manner. Generally, we move 

only those procedures for which we 

have an adequate number of discharges 

to analyze the data. 

There are no cases representing shifts 

in treatment practice or reporting 

practice that would make the resulting 

MS–DRG assignment illogical, or that 

merited movement so that cases should 

logically be assigned to any of the other 

MDCs. Therefore, for FY 2016, we are 

not proposing to move any procedure 

codes among these MS–DRGs. 

(2) Review of Cases With Endovascular 

Embolization Procedures for Epistaxis 

During the comment period for the FY 

2015 IPPS/LTCH PPS proposed rule, we 

received a public comment expressing 

concern regarding specific procedure 

codes that are assigned to MS–DRGs 981 

through 983; 984 through 986; and 987 

through 989 in relation to our 

discussion of the annual review of these 

MS–DRGs in section II.G.12. of that 

proposed rule (79 FR 28020). The 

commenter noted that the endovascular 

embolization of the arteries of the 

branches of the internal maxillary artery 

is frequently performed for intractable 

posterior epistaxis (nosebleed). The 

commenter stated that, currently, 

diagnosis code 784.7 (Epistaxis) 

reported with procedure codes 39.75 

(Endovascular embolization or 

occlusion of vessel(s) of head or neck 

using bare coils) and 39.76 

(Endovascular embolization or 

occlusion of vessel(s) of head or neck 

using bioactive coils) groups to MS– 

DRGs 981, 982, and 983. The 

commenter indicated that it also found 

this grouping with the ICD–10 MS– 

DRGs Version 31 using ICD–10–CM 

diagnosis code R04.0 (Epistaxis) 

reported with artery occlusion 

procedure codes. The commenter 

requested that CMS review these 

groupings and consider the possibility 

of reassigning these epistaxis cases with 

endovascular embolization procedure 

codes into a more specific MS–DRG. 

We considered this public comment 

to be outside of the scope of the FY 2015 

IPPS/LTCH PPS proposed rule and, 

therefore, did not address it in the FY 

2015 IPPS/LTCH PPS final rule. 

However, we indicated that we would 

consider this public comment for 

possible proposals in future rulemaking 

as part of our annual review process. 

ICD–10–PCS provides more detailed 

codes for endovascular embolization or 

occlusion of vessel(s) of head or neck 

using bare coils and bioactive coils 

which are listed in the following table: 

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF VESSEL(S) OF HEAD OR NECK USING BARE

COILS AND BIOACTIVE COILS

ICD–10–PCS code Code description 

03LG0BZ ...................... Occlusion of intracranial artery with bioactive intraluminal device, open approach. 

03LG0DZ ...................... Occlusion of intracranial artery with intraluminal device, open approach. 

03LG3BZ ...................... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous approach. 

03LG3DZ ...................... Occlusion of intracranial artery with intraluminal device, percutaneous approach. 

03LG4BZ ...................... Occlusion of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LG4DZ ...................... Occlusion of intracranial artery with intraluminal device, percutaneous endoscopic approach. 

03LH0BZ ....................... Occlusion of right common carotid artery with bioactive intraluminal device, open approach. 

03LH0DZ ...................... Occlusion of right common carotid artery with intraluminal device, open approach. 

03LH3BZ ....................... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous approach. 

03LH3DZ ...................... Occlusion of right common carotid artery with intraluminal device, percutaneous approach. 

03LH4BZ ....................... Occlusion of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LH4DZ ...................... Occlusion of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LJ0BZ ....................... Occlusion of left common carotid artery with bioactive intraluminal device, open approach. 

03LJ0DZ ....................... Occlusion of left common carotid artery with intraluminal device, open approach. 

03LJ3BZ ....................... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous approach. 

03LJ3DZ ....................... Occlusion of left common carotid artery with intraluminal device, percutaneous approach. 

03LJ4BZ ....................... Occlusion of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LJ4DZ ....................... Occlusion of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LK0BZ ....................... Occlusion of right internal carotid artery with bioactive intraluminal device, open approach. 

03LK0DZ ....................... Occlusion of right internal carotid artery with intraluminal device, open approach. 

03LK3BZ ....................... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03LK3DZ ....................... Occlusion of right internal carotid artery with intraluminal device, percutaneous approach. 

03LK4BZ ....................... Occlusion of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LK4DZ ....................... Occlusion of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LL0BZ ....................... Occlusion of left internal carotid artery with bioactive intraluminal device, open approach. 

03LL0DZ ....................... Occlusion of left internal carotid artery with intraluminal device, open approach. 

03LL3BZ ....................... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03LL3DZ ....................... Occlusion of left internal carotid artery with intraluminal device, percutaneous approach. 

03LL4BZ ....................... Occlusion of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LL4DZ ....................... Occlusion of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LM0BZ ...................... Occlusion of right external carotid artery with bioactive intraluminal device, open approach. 

03LM0DZ ...................... Occlusion of right external carotid artery with intraluminal device, open approach. 

03LM3BZ ...................... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous approach. 

03LM3DZ ...................... Occlusion of right external carotid artery with intraluminal device, percutaneous approach. 

03LM4BZ ...................... Occlusion of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LM4DZ ...................... Occlusion of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LN0BZ ....................... Occlusion of left external carotid artery with bioactive intraluminal device, open approach. 

03LN0DZ ...................... Occlusion of left external carotid artery with intraluminal device, open approach. 

03LN3BZ ....................... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous approach. 

03LN3DZ ...................... Occlusion of left external carotid artery with intraluminal device, percutaneous approach. 

03LN4BZ ....................... Occlusion of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LN4DZ ...................... Occlusion of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03LP0BZ ....................... Occlusion of right vertebral artery with bioactive intraluminal device, open approach. 

03LP0DZ ....................... Occlusion of right vertebral artery with intraluminal device, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24404 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF VESSEL(S) OF HEAD OR NECK USING BARE

COILS AND BIOACTIVE COILS—Continued 

ICD–10–PCS code Code description 

03LP3BZ ....................... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous approach. 

03LP3DZ ....................... Occlusion of right vertebral artery with intraluminal device, percutaneous approach. 

03LP4BZ ....................... Occlusion of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LP4DZ ....................... Occlusion of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03LQ0BZ ...................... Occlusion of left vertebral artery with bioactive intraluminal device, open approach. 

03LQ0DZ ...................... Occlusion of left vertebral artery with intraluminal device, open approach. 

03LQ3BZ ...................... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous approach. 

03LQ3DZ ...................... Occlusion of left vertebral artery with intraluminal device, percutaneous approach. 

03LQ4BZ ...................... Occlusion of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03LQ4DZ ...................... Occlusion of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03VG0BZ ...................... Restriction of intracranial artery with bioactive intraluminal device, open approach. 

03VG0DZ ...................... Restriction of intracranial artery with intraluminal device, open approach. 

03VG3BZ ...................... Restriction of intracranial artery with bioactive intraluminal device, percutaneous approach. 

03VG3DZ ...................... Restriction of intracranial artery with intraluminal device, percutaneous approach. 

03VG4BZ ...................... Restriction of intracranial artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VG4DZ ...................... Restriction of intracranial artery with intraluminal device, percutaneous endoscopic approach. 

03VH0BZ ...................... Restriction of right common carotid artery with bioactive intraluminal device, open approach. 

03VH0DZ ...................... Restriction of right common carotid artery with intraluminal device, open approach. 

03VH3BZ ...................... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous approach. 

03VH3DZ ...................... Restriction of right common carotid artery with intraluminal device, percutaneous approach. 

03VH4BZ ...................... Restriction of right common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VH4DZ ...................... Restriction of right common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VJ0BZ ....................... Restriction of left common carotid artery with bioactive intraluminal device, open approach. 

03VJ0DZ ....................... Restriction of left common carotid artery with intraluminal device, open approach. 

03VJ3BZ ....................... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous approach. 

03VJ3DZ ....................... Restriction of left common carotid artery with intraluminal device, percutaneous approach. 

03VJ4BZ ....................... Restriction of left common carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VJ4DZ ....................... Restriction of left common carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VK0BZ ...................... Restriction of right internal carotid artery with bioactive intraluminal device, open approach. 

03VK0DZ ...................... Restriction of right internal carotid artery with intraluminal device, open approach. 

03VK3BZ ...................... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03VK3DZ ...................... Restriction of right internal carotid artery with intraluminal device, percutaneous approach. 

03VK4BZ ...................... Restriction of right internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VK4DZ ...................... Restriction of right internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VL0BZ ....................... Restriction of left internal carotid artery with bioactive intraluminal device, open approach. 

03VL0DZ ....................... Restriction of left internal carotid artery with intraluminal device, open approach. 

03VL3BZ ....................... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous approach. 

03VL3DZ ....................... Restriction of left internal carotid artery with intraluminal device, percutaneous approach. 

03VL4BZ ....................... Restriction of left internal carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VL4DZ ....................... Restriction of left internal carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VM0BZ ...................... Restriction of right external carotid artery with bioactive intraluminal device, open approach. 

03VM0DZ ...................... Restriction of right external carotid artery with intraluminal device, open approach. 

03VM3BZ ...................... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous approach. 

03VM3DZ ...................... Restriction of right external carotid artery with intraluminal device, percutaneous approach. 

03VM4BZ ...................... Restriction of right external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VM4DZ ...................... Restriction of right external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VN0BZ ...................... Restriction of left external carotid artery with bioactive intraluminal device, open approach. 

03VN0DZ ...................... Restriction of left external carotid artery with intraluminal device, open approach. 

03VN3BZ ...................... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous approach. 

03VN3DZ ...................... Restriction of left external carotid artery with intraluminal device, percutaneous approach. 

03VN4BZ ...................... Restriction of left external carotid artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VN4DZ ...................... Restriction of left external carotid artery with intraluminal device, percutaneous endoscopic approach. 

03VP0BZ ...................... Restriction of right vertebral artery with bioactive intraluminal device, open approach. 

03VP0DZ ...................... Restriction of right vertebral artery with intraluminal device, open approach. 

03VP3BZ ...................... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous approach. 

03VP3DZ ...................... Restriction of right vertebral artery with intraluminal device, percutaneous approach. 

03VP4BZ ...................... Restriction of right vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VP4DZ ...................... Restriction of right vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03VQ0BZ ...................... Restriction of left vertebral artery with bioactive intraluminal device, open approach. 

03VQ0DZ ...................... Restriction of left vertebral artery with intraluminal device, open approach. 

03VQ3BZ ...................... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous approach. 

03VQ3DZ ...................... Restriction of left vertebral artery with intraluminal device, percutaneous approach. 

03VQ4BZ ...................... Restriction of left vertebral artery with bioactive intraluminal device, percutaneous endoscopic approach. 

03VQ4DZ ...................... Restriction of left vertebral artery with intraluminal device, percutaneous endoscopic approach. 

03VR0DZ ...................... Restriction of face artery with intraluminal device, open approach. 

03VR3DZ ...................... Restriction of face artery with intraluminal device, percutaneous approach. 

03VR4DZ ...................... Restriction of face artery with intraluminal device, percutaneous endoscopic approach. 

03VS0DZ ...................... Restriction of right temporal artery with intraluminal device, open approach. 

03VS3DZ ...................... Restriction of right temporal artery with intraluminal device, percutaneous approach. 

03VS4DZ ...................... Restriction of right temporal artery with intraluminal device, percutaneous endoscopic approach. 

03VT0DZ ...................... Restriction of left temporal artery with intraluminal device, open approach. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24405 

ICD–10–PCS CODES FOR ENDOVASCULAR EMBOLIZATION OR OCCLUSION OF VESSEL(S) OF HEAD OR NECK USING BARE

COILS AND BIOACTIVE COILS—Continued 

ICD–10–PCS code Code description 

03VT3DZ ...................... Restriction of left temporal artery with intraluminal device, percutaneous approach. 

03VT4DZ ...................... Restriction of left temporal artery with intraluminal device, percutaneous endoscopic approach. 

03VU0DZ ...................... Restriction of right thyroid artery with intraluminal device, open approach. 

03VU3DZ ...................... Restriction of right thyroid artery with intraluminal device, percutaneous approach. 

03VU4DZ ...................... Restriction of right thyroid artery with intraluminal device, percutaneous endoscopic approach. 

03VV0DZ ...................... Restriction of left thyroid artery with intraluminal device, open approach. 

03VV3DZ ...................... Restriction of left thyroid artery with intraluminal device, percutaneous approach. 

03VV4DZ ...................... Restriction of left thyroid artery with intraluminal device, percutaneous endoscopic approach. 

We examined claims data from the 

December 2014 update of the FY 2014 

MedPAR file for cases with diagnosis 

code 784.7 reported with procedure 

codes 39.75 and 39.76 in MS–DRGs 981, 

982, and 983. The following table shows 

our findings. 

ENDOVASCULAR EMBOLIZATION PROCEDURES FOR EPISTAXIS

MS–DRG Number of 

cases 

Average 

length of 

stay 

Average 

costs 

MS–DRG 981—All cases ............................................................................................................ 21,118 12.38 $33,080 

MS–DRG 981—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.75 ........................................................................................................................................ 8 6.50 34,655 

MS–DRG 981—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.76 ........................................................................................................................................ 2 12.50 50,081 

MS–DRG 982—All cases ............................................................................................................ 13,657 7.14 19,392 

MS–DRG 982—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.75 ........................................................................................................................................ 22 3.14 17,725 

MS–DRG 982—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.76 ........................................................................................................................................ 2 2.0 11,010 

MS–DRG 983—All cases ............................................................................................................ 2,989 3.60 12,760 

MS–DRG 983—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.75 ........................................................................................................................................ 5 2.60 10,532 

MS–DRG 983—Epistaxis cases with principal diagnosis code 784.7 and procedure code 

39.76 ........................................................................................................................................ 4 1.50 16,658 

We found only 35 epistaxis cases with 

procedure code 39.75 reported and 8 

cases with procedure code 39.76 

reported among MS–DRGs 981, 982, and 

983. The use of endovascular 

embolizations for epistaxis appears to be 

rare. The average costs for the cases 

with procedure code 39.75 in MS–DRGs 

981, 982, and 983 are similar to the 

average costs for all cases in MS–DRGs 

981, 982, and 983, respectively. The 

average costs for the cases with 

procedure code 39.75 in MS–DRGs 981, 

982, and 983 were $34,655, $17,725, 

and $10,532, respectively, compared to 

$33,080, $19,392, and $12,760 for all 

cases in MS–DRGs 981, 982, and 983. 

The average costs for cases with 

procedure code 39.76 in MS–DRGs 981, 

982, and 983 were $50,081, $11,010, 

and $16,658, respectively, and were 

significantly greater than all cases in 

MS–DRGs 981 and 983. However, as 

stated earlier, there were only 8 cases 

reported with procedure code 39.76. As 

explained previously, MS–DRGs 981, 

982, and 983 were created for operating 

room procedures that are unrelated to 

the principal diagnosis. Because there 

were so few cases reported, this does 

not appear to be a common procedure 

for epistaxis. There were not enough 

cases to base a change of MS–DRG 

assignment for these cases. 

Our clinical advisors reviewed this 

issue and did not identify any new MS– 

DRG assignment that would be more 

appropriate for these rare cases. They 

advised us to maintain the current MS– 

DRG structure within MS–DRGs 981, 

982, and 983. 

Based on the results of the 

examination of the claims data and the 

recommendations from our clinical 

advisors, we are not proposing to create 

new MS–DRG assignments for epistaxis 

cases receiving endovascular 

embolization procedures. We are 

proposing to maintain the current MS– 

DRG structure for epistaxis cases 

receiving endovascular embolization 

procedures and are not proposing any 

updates to MS–DRGs 981, 982, and 983. 

We are inviting public comments on our 

proposal. 

c. Adding Diagnosis or Procedure Codes 

to MDCs 

Based on the review of cases in the 

MDCs, as described above in sections 

II.G.2. through 7. of the preamble of this 

proposed rule, we are not proposing to 

add any diagnosis or procedure codes to 

MDCs for FY 2016. We are inviting 

public comments on our proposal. 

13. Proposed Changes to the ICD–9–CM 

System 

a. ICD–10 Coordination and 

Maintenance Committee 

In September 1985, the ICD–9–CM 

Coordination and Maintenance 

Committee was formed. This is a 

Federal interdepartmental committee, 

co-chaired by the National Center for 

Health Statistics (NCHS), the Centers for 

Disease Control and Prevention, and 

CMS, charged with maintaining and 

updating the ICD–9–CM system. The 

final update to ICD–9–CM codes was to 

be made on October 1, 2013. Thereafter, 

the name of the Committee was changed 

to the ICD–10 Coordination and 

Maintenance Committee, effective with 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24406 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

the March 19–20, 2014 meeting. The 

ICD–10 Coordination and Maintenance 

Committee addresses updates to the 

ICD–10–CM, ICD–10–PCS, and ICD–9– 

CM coding systems. The Committee is 

jointly responsible for approving coding 

changes, and developing errata, 

addenda, and other modifications to the 

coding systems to reflect newly 

developed procedures and technologies 

and newly identified diseases. The 

Committee is also responsible for 

promoting the use of Federal and nonFederal educational programs and other 

communication techniques with a view 

toward standardizing coding 

applications and upgrading the quality 

of the classification system. 

The official list of ICD–9–CM 

diagnosis and procedure codes by fiscal 

year can be found on the CMS Web site 

at: http://www.cms.gov/Medicare/

Coding/ICD9ProviderDiagnosticCodes/

codes.html. The official list of ICD–10– 

CM and ICD–10–PCS codes can be 

found on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/ICD10/

index.html. 

The NCHS has lead responsibility for 

the ICD–10–CM and ICD–9–CM 

diagnosis codes included in the Tabular 

List and Alphabetic Index for Diseases, 

while CMS has lead responsibility for 

the ICD–10–PCS and ICD–9–CM 

procedure codes included in the 

Tabular List and Alphabetic Index for 

Procedures. 

The Committee encourages 

participation in the above process by 

health-related organizations. In this 

regard, the Committee holds public 

meetings for discussion of educational 

issues and proposed coding changes. 

These meetings provide an opportunity 

for representatives of recognized 

organizations in the coding field, such 

as the American Health Information 

Management Association (AHIMA), the 

American Hospital Association (AHA), 

and various physician specialty groups, 

as well as individual physicians, health 

information management professionals, 

and other members of the public, to 

contribute ideas on coding matters. 

After considering the opinions 

expressed at the public meetings and in 

writing, the Committee formulates 

recommendations, which then must be 

approved by the agencies. 

The Committee presented proposals 

for coding changes for implementation 

in FY 2016 at a public meeting held on 

September 23–24, 2014, and finalized 

the coding changes after consideration 

of comments received at the meetings 

and in writing by November 15, 2014. 

The Committee held its 2015 meeting 

on March 18–19, 2015. It was 

announced at this meeting that any new 

ICD–10–CM/PCS codes for which there 

was consensus of public support and for 

which complete tabular and indexing 

changes would be made by May 2015 

would be included in the October 1, 

2015 update to ICD–10–CM/ICD–10– 

PCS. For FY 2016, there are no new, 

revised, or deleted ICD–10–CM 

diagnosis codes. For FY 2016, there are 

new ICD–10–PCS procedure codes that 

are included in Table 6B (New 

Procedure Codes). However, there are 

no revised or deleted ICD–10–PCS 

procedure codes. There also are no new 

ICD–9–CM diagnosis or procedure codes 

because ICD–9–CM will be replaced by 

ICD–10–CM/ICD–10–PCS for services 

provided on or after October 1, 2015. 

Copies of the agenda, handouts, and 

access to the live stream videos for the 

procedure codes discussions at the 

Committee’s September 23–24, 2014 

meeting and March 18–19, 2015 meeting 

can be obtained from the CMS Web site 

at: http://www.cms.gov/Medicare/

Coding/ICD9ProviderDiagnosticCodes/

index.html?redirect=/

icd9ProviderDiagnosticCodes/03_

meetings.asp. The agenda, handouts and 

minutes of the diagnosis codes 

discussions at the September 23–24, 

2014 meeting and March 18–19, 2015 

meeting are found at: http://

www.cdc.gov/nchs/icd/icd9cmmaintenance.html. These Web sites also 

provide detailed information about the 

Committee, including information on 

requesting a new code, attending a 

Committee meeting, timeline 

requirements and meeting dates. 

We encourage commenters to address 

suggestions on coding issues involving 

diagnosis codes to: Donna Pickett, CoChairperson, ICD–10 Coordination and 

Maintenance Committee, NCHS, Room 

2402, 3311 Toledo Road, Hyattsville, 

MD 20782. Comments may be sent by 

Email to: dfp4@cdc.gov. 

Questions and comments concerning 

the procedure codes should be 

addressed to: Patricia Brooks, CoChairperson, ICD–10 Coordination and 

Maintenance Committee, CMS, Center 

for Medicare, Hospital and Ambulatory 

Policy Group, Division of Acute Care, 

C4–08–06, 7500 Security Boulevard, 

Baltimore, MD 21244–1850. Comments 

may be sent by Email to: 

patricia.brooks2@cms.hhs.gov. 

In the September 7, 2001 final rule 

implementing the IPPS new technology 

add-on payments (66 FR 46906), we 

indicated we would attempt to include 

proposals for procedure codes that 

would describe new technology 

discussed and approved at the Spring 

meeting as part of the code revisions 

effective the following October. 

Section 503(a) of Public Law 108–173 

included a requirement for updating 

ICD–9–CM codes twice a year instead of 

a single update on October 1 of each 

year. This requirement was included as 

part of the amendments to the Act 

relating to recognition of new 

technology under the IPPS. Section 

503(a) amended section 1886(d)(5)(K) of 

the Act by adding a clause (vii) which 

states that the Secretary shall provide 

for the addition of new diagnosis and 

procedure codes on April 1 of each year, 

but the addition of such codes shall not 

require the Secretary to adjust the 

payment (or diagnosis-related group 

classification) until the fiscal year that 

begins after such date. This requirement 

improves the recognition of new 

technologies under the IPPS system by 

providing information on these new 

technologies at an earlier date. Data will 

be available 6 months earlier than 

would be possible with updates 

occurring only once a year on October 

1. 

While section 1886(d)(5)(K)(vii) of the 

Act states that the addition of new 

diagnosis and procedure codes on April 

1 of each year shall not require the 

Secretary to adjust the payment, or DRG 

classification, under section 1886(d) of 

the Act until the fiscal year that begins 

after such date, we have to update the 

DRG software and other systems in 

order to recognize and accept the new 

codes. We also publicize the code 

changes and the need for a mid-year 

systems update by providers to identify 

the new codes. Hospitals also have to 

obtain the new code books and encoder 

updates, and make other system changes 

in order to identify and report the new 

codes. 

The ICD–10 (previously the ICD–9– 

CM) Coordination and Maintenance 

Committee holds its meetings in the 

spring and fall in order to update the 

codes and the applicable payment and 

reporting systems by October 1 of each 

year. Items are placed on the agenda for 

the Committee meeting if the request is 

received at least 2 months prior to the 

meeting. This requirement allows time 

for staff to review and research the 

coding issues and prepare material for 

discussion at the meeting. It also allows 

time for the topic to be publicized in 

meeting announcements in the Federal 

Register as well as on the CMS Web site. 

The public decides whether or not to 

attend the meeting based on the topics 

listed on the agenda. Final decisions on 

code title revisions are currently made 

by March 1 so that these titles can be 

included in the IPPS proposed rule. A 

complete addendum describing details 

of all diagnosis and procedure coding 

changes, both tabular and index, is 


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published on the CMS and NCHS Web 

sites in May of each year. Publishers of 

coding books and software use this 

information to modify their products 

that are used by health care providers. 

This 5-month time period has proved to 

be necessary for hospitals and other 

providers to update their systems. 

A discussion of this timeline and the 

need for changes are included in the 

December 4–5, 2005 ICD–9–CM 

Coordination and Maintenance 

Committee Meeting minutes. The public 

agreed that there was a need to hold the 

fall meetings earlier, in September or 

October, in order to meet the new 

implementation dates. The public 

provided comment that additional time 

would be needed to update hospital 

systems and obtain new code books and 

coding software. There was considerable 

concern expressed about the impact this 

new April update would have on 

providers. 

In the FY 2005 IPPS final rule, we 

implemented section 1886(d)(5)(K)(vii) 

of the Act, as added by section 503(a) 

of Public Law 108–173, by developing a 

mechanism for approving, in time for 

the April update, diagnosis and 

procedure code revisions needed to 

describe new technologies and medical 

services for purposes of the new 

technology add-on payment process. We 

also established the following process 

for making these determinations. Topics 

considered during the Fall ICD–10 

(previously ICD–9–CM) Coordination 

and Maintenance Committee meeting 

are considered for an April 1 update if 

a strong and convincing case is made by 

the requestor at the Committee’s public 

meeting. The request must identify the 

reason why a new code is needed in 

April for purposes of the new 

technology process. The participants at 

the meeting and those reviewing the 

Committee meeting summary report are 

provided the opportunity to comment 

on this expedited request. All other 

topics are considered for the October 1 

update. Participants at the Committee 

meeting are encouraged to comment on 

all such requests. There were no 

requests approved for an expedited 

April l, 2015 implementation of a code 

at the September 23–24, 2014 

Committee meeting. Therefore, there 

were no new codes implemented on 

April 1, 2015. 

ICD–9–CM addendum and code title 

information is published on the CMS 

Web site at: http://www.cms.gov/

Medicare/Coding/

ICD9ProviderDiagnosticCodes/

index.html?redirect=/

icd9ProviderDiagnosticCodes/

01overview.asp#TopofPage. ICD–10–CM 

and ICD–10–PCS addendum and code 

title information is published on the 

CMS Web site at http://www.cms.gov/

Medicare/Coding/ICD10/index.html. 

Information on ICD–10–CM diagnosis 

codes, along with the Official ICD–10– 

CM Coding Guidelines, can also be 

found on the CDC Web site at: http://

www.cdc.gov/nchs/index.html. 

Information on new, revised, and 

deleted ICD–10–CM/ICD–10–PCS codes 

is also provided to the AHA for 

publication in the Coding Clinic for 

ICD–10. AHA also distributes 

information to publishers and software 

vendors. 

CMS also sends copies of all ICD–10– 

CM and ICD–10–PCS coding changes to 

its Medicare contractors for use in 

updating their systems and providing 

education to providers. 

The code titles are adopted as part of 

the ICD–10 (previously ICD–9–CM) 

Coordination and Maintenance 

Committee process. Therefore, although 

we publish the code titles in the IPPS 

proposed and final rules, they are not 

subject to comment in the proposed or 

final rules. 

b. Code Freeze 

In the January 16, 2009 ICD–10–CM 

and ICD–10–PCS final rule (74 FR 

3340), there was a discussion of the 

need for a partial or total freeze in the 

annual updates to both ICD–9–CM and 

ICD–10–CM and ICD–10–PCS codes. 

The public comment addressed in that 

final rule stated that the annual code set 

updates should cease l year prior to the 

implementation of ICD–10. The 

commenters stated that this freeze of 

code updates would allow for 

instructional and/or coding software 

programs to be designed and purchased 

early, without concern that an upgrade 

would take place immediately before 

the compliance date, necessitating 

additional updates and purchases. 

HHS responded to comments in the 

ICD–10 final rule that the ICD–9–CM 

Coordination and Maintenance 

Committee has jurisdiction over any 

action impacting the ICD–9–CM and 

ICD–10 code sets. Therefore, HHS 

indicated that the issue of consideration 

of a moratorium on updates to the ICD– 

9–CM, ICD–10–CM, and ICD–10–PCS 

code sets in anticipation of the adoption 

of ICD–10–CM and ICD–10–PCS would 

be addressed through the Committee at 

a future public meeting. 

The code freeze was discussed at 

multiple meetings of the ICD–9–CM 

Coordination and Maintenance 

Committee and public comment was 

actively solicited. The Committee 

evaluated all comments from 

participants attending the Committee 

meetings as well as written comments 

that were received. The Committee also 

considered the delay in implementation 

of ICD–10 until October 1, 2014. There 

was an announcement at the September 

19, 2012 ICD–9–CM Coordination and 

Maintenance Committee meeting that a 

partial freeze of both ICD–9–CM and 

ICD–10 codes will be implemented as 

follows: 

• The last regular annual update to 

both ICD–9–CM and ICD–10 code sets 

was made on October 1, 2011. 

• On October 1, 2012 and October 1, 

2013, there were to be only limited code 

updates to both ICD–9–CM and ICD–10 

code sets to capture new technology and 

new diseases. 

• On October 1, 2014, there were to 

be only limited code updates to ICD–10 

code sets to capture new technology and 

diagnoses as required by section 503(a) 

of Public Law 108–173. There were to 

be no updates to ICD–9–CM on October 

1, 2014. 

• On October 1, 2015, one year after 

the originally scheduled 

implementation of ICD–10, regular 

updates to ICD–10 were to begin. 

On May 15, 2014, CMS posted an 

updated Partial Code Freeze schedule 

on the CMS Web site at: http://

www.cms.gov/Medicare/Coding/ICD10/

ICD-9-CM-Coordination-andMaintenance-Committee-Meetings.html. 

This updated schedule provided 

information on the extension of the 

partial code freeze until 1 year after the 

implementation of ICD–10. As stated 

earlier, on April 1, 2014, the Protecting 

Access to Medicare Act of 2014 (PAMA) 

(Pub. L. 113–93) was enacted, which 

specified that the Secretary may not 

adopt ICD–10 prior to October 1, 2015. 

Accordingly, the U.S. Department of 

Health and Human Services released a 

final rule in the Federal Register on 

August 4, 2014 (79 FR 45128 through 

45134) that included a new compliance 

date that requires the use of ICD–10 

beginning October 1, 2015. The August 

4, 2014 final rule is available for 

viewing on the Internet at: http://

www.gpo.gov/fdsys/pkg/FR-2014-08-04/

pdf/2014-18347.pdf. That final rule also 

requires HIPAA covered entities to 

continue to use ICD–9–CM through 

September 30, 2015. Accordingly, the 

updated schedule for the partial code 

freeze is as follows: 

• The last regular annual updates to 

both ICD–9–CM and ICD–10 code sets 

were made on October 1, 2011. 

• On October 1, 2012, October 1, 

2013, and October 1, 2014, there were 

only limited code updates to both the 

ICD–9–CM and ICD–10 code sets to 

capture new technologies and diseases 

as required by section 1886(d)(5)(K) of 

the Act. 


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• On October 1, 2015, there will be 

only limited code updates to ICD–10 

code sets to capture new technologies 

and diagnoses as required by section 

1886(d)(5)(K) of the Act. There will be 

no updates to ICD–9–CM, as it will no 

longer be used for reporting. 

• On October 1, 2016 (1 year after 

implementation of ICD–10), regular 

updates to ICD–10 will begin. 

The ICD–10 (previously ICD–9–CM) 

Coordination and Maintenance 

Committee announced that it would 

continue to meet twice a year during the 

freeze. At these meetings, the public 

will be encouraged to comment on 

whether or not requests for new 

diagnosis and procedure codes should 

be created based on the need to capture 

new technology and new diseases. Any 

code requests that do not meet the 

criteria will be evaluated for 

implementation within ICD–10 one year 

after the implementation of ICD–10, 

once the partial freeze is ended. 

Complete information on the partial 

code freeze and discussions of the 

issues at the Committee meetings can be 

found on the ICD–10 Coordination and 

Maintenance Committee Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/

meetings.html. A summary of the 

September 19, 2012 Committee meeting, 

along with both written and audio 

transcripts of this meeting, is posted on 

the Web site at: http://www.cms.gov/

Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials-Items/

2012-09-19-MeetingMaterials.html. 

This partial code freeze has 

dramatically decreased the number of 

codes created each year as shown by the 

following information. 

TOTAL NUMBER OF CODES AND CHANGES IN TOTAL NUMBER OF CODES PER FISCAL YEAR

ICD–9–CM Codes ICD–10–CM and ICD–10–PCS Codes 

Fiscal Year Number Change Fiscal Year Number Change 

FY 2009 (October 1, 2008): FY 2009: 

Diagnoses .......................................... 14,025 348 ICD–10–CM ...................................... 68,069 +5 

Procedures ........................................ 3,824 56 ICD–10–PCS .................................... 72,589 ¥14,327 

FY 2010 (October 1, 2009): FY 2010: 

Diagnoses .......................................... 14,315 290 ICD–10–CM ...................................... 69,099 +1,030 

Procedures ........................................ 3,838 14 ICD–10–PCS .................................... 71,957 ¥632 

FY 2011(October 1, 2010): 

Diagnoses .......................................... 14,432 117 ICD–10–CM ...................................... 69,368 +269 

Procedures ........................................ 3,859 21 ICD–10–PCS .................................... 72,081 +124 

FY 2012 (October 1, 2011): FY 2012: 

Diagnoses .......................................... 14,567 135 ICD–10–CM ...................................... 69,833 +465 

Procedures ........................................ 3,877 18 ICD–10–PCS .................................... 71,918 ¥163 

FY 2013 (October 1, 2012): FY 2013: 

Diagnoses .......................................... 14,567 0 ICD–10–CM ...................................... 69,832 ¥1 

Procedures ........................................ 3,878 1 ICD–10–PCS .................................... 71,920 +2 

FY 2014 (October 1, 2013): FY 2014: 

Diagnoses .......................................... 14,567 0 ICD–10–CM ...................................... 69,823 ¥9 

Procedures ........................................ 3,882 4 ICD–10–PCS .................................... 71,924 +4 

FY 2015 (October 1, 2014): FY 2015: 

Diagnoses .......................................... 14,567 0 ICD–10–CM ...................................... 69,823 0 

Procedures ........................................ 3,882 0 ICD–10–PCS .................................... 71,924 0 

FY 2016 (October 1, 2015): FY 2016: 

Diagnoses .......................................... 14,567 0 ICD–10–CM ...................................... 69,823 0 

Procedures ........................................ 3,882 0 ICD–10–PCS .................................... 71,962 +38 

As mentioned earlier, the public is 

provided the opportunity to comment 

on any requests for new diagnosis or 

procedure codes discussed at the ICD– 

10 Coordination and Maintenance 

Committee meeting. The public has 

supported only a limited number of new 

codes during the partial code freeze, as 

can be seen by data shown above. We 

have gone from creating several 

hundred new codes each year to 

creating only a limited number of new 

ICD–9–CM and ICD–10 codes. 

At the September 23–24, 2014 and 

March 18–19, 2015 Committee 

meetings, we discussed any requests we 

had received for new ICD–10–CM 

diagnosis and ICD–10–PCS procedure 

codes that were to be implemented on 

October 1, 2015. We did not discuss 

ICD–9–CM codes. The public was given 

the opportunity to comment on whether 

or not new ICD–10–CM and ICD–10– 

PCS codes should be created, based on 

the partial code freeze criteria. The 

public was to use the criteria as to 

whether codes were needed to capture 

new diagnoses or new technologies. If 

the codes do not meet those criteria for 

implementation during the partial code 

freeze, consideration was to be given as 

to whether the codes should be created 

after the partial code freeze ends 1 year 

after the implementation of ICD–10– 

CM/PCS. We invited public comments 

on any code requests discussed at the 

September 23–24, 2014 and March 18– 

19, 2015 Committee meetings for 

implementation as part of the October 1, 

2015 update. The deadline for 

commenting on code proposals 

discussed at the September 23–24, 2014 

Committee meeting was November 21, 

2014. The deadline for commenting on 

code proposals discussed at the March 

18–19, 2015 Committee meeting was 

April 17, 2015. 

14. Other Proposed Policy Changes: 

Replaced Devices Offered Without Cost 

or With a Credit 

a. Background 

In the FY 2008 IPPS final rule with 

comment period (72 FR 47246 through 

47251), we discussed the topic of 

Medicare payment for devices that are 

replaced without cost or where credit 

for a replaced device is furnished to the 

hospital. We implemented a policy to 

reduce a hospital’s IPPS payment for 

certain MS–DRGs where the 

implantation of a device that has been 

recalled determined the base MS–DRG 

assignment. We specified that if a 

hospital received a credit for a recalled 

device equal to 50 percent or more of 

the cost of the device, we would reduce 


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a hospital’s IPPS payment for those MS– 

DRGs. 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51556 and 51557), we 

clarified this policy to state that the 

policy applies if the hospital received a 

credit equal to 50 percent or more of the 

cost of the replacement device and 

issued instructions to hospitals 

accordingly. 

b. Request for Clarification on Policy 

Relating to ‘‘Device-Dependent’’ MS– 

DRGs 

After publication of the FY 2015 

IPPS/LTCH PPS final rule, we received 

a request to clarify the list of ‘‘devicedependent’’ MS–DRGs subject to the 

policy for payment under the IPPS for 

replaced devices offered without cost or 

with a credit. Specifically, a requestor 

noted that ICD–9–CM procedure codes 

that previously grouped to MS–DRGs 

216 through 221 (Cardiac Valve & Other 

Major Cardiothoracic Procedure with 

and without Cardiac Catheterization, 

with MCC, with CC, without CC/MCC, 

respectively) and were subject to the 

policy for payment under the IPPS as 

‘‘device-dependent’’ MS–DRGs had 

been reassigned to new MS–DRGs 266 

and 267 (Endovascular Cardiac Valve 

Replacement with MCC and without 

MCC, respectively). The requestor 

suggested that MS–DRGs 266 and 267 

also should be considered ‘‘devicedependent’’ MS–DRGs and added to the 

list of MS–DRGs subject to the IPPS 

payment policy for replaced devices 

offered without cost or with a credit. 

As noted by the requestor, as final 

policy for FY 2015, certain ICD–9–CM 

procedure codes that previously 

grouped to MS–DRGs 216 through 221, 

which are on the list of MS–DRGs 

subject to the policy for payment under 

the IPPS for replaced devices offered 

without cost or with a credit, were 

reassigned to MS–DRGs 266 and 267. 

We agree that MS–DRGs 266 and 267 

should be included in the list of 

‘‘device-dependent’’ MS–DRGs subject 

to the IPPS policy. We generally map 

new MS–DRGs onto the list when they 

are formed from procedures previously 

assigned to MS–DRGs that are already 

on the list. Therefore, we are proposing 

to add MS–DRGs 266 and 267 to the list 

of ‘‘device dependent’’ MS–DRGs 

subject to the policy for payment under 

the IPPS for replaced devices offered 

without cost or with a credit. 

In addition, as discussed in section 

II.G.4.e. of the preamble of this 

proposed rule, for FY 2016, we are 

proposing to delete MS–DRGs 237 and 

238 (Major Cardiovascular Procedures 

with MCC and without MCC, 

respectively) and create new MS–DRGs 

268 and 269 (Aortic and Heart Assist 

Procedures Except Pulsation Balloon 

with MCC and without MCC, 

respectively), as well as new MS–DRGs 

270, 271, and 272 (Other Major 

Cardiovascular Procedures with MCC, 

with CC, and without CC/MCC, 

respectively). Currently, MS–DRGs 237 

and 238 are on the list of MS–DRGs 

subject to the policy for payment under 

the IPPS for replaced devices offered 

without cost or with a credit. As stated 

previously, we generally map new MS– 

DRGs onto the list when they are formed 

from procedures previously assigned to 

MS–DRGs that are already on the list. 

Therefore, if finalized, we also would 

add proposed new MS–DRGs 268 

through 272 to the list of MS–DRGs 

subject to the policy for payment under 

the IPPS for replaced devices offered 

without cost or with a credit. 

In summary, we are proposing to add 

MS–DRGs 266 and 267 to the list of 

MS–DRGs subject to the policy for 

payment under the IPPS for replaced 

devices offered without cost or with a 

credit, and if the applicable proposed 

MS–DRG changes are finalized, to also 

remove existing MS–DRGs 237 and 238 

and add proposed new MS–DRGs 268 

through 272. The proposed list of MS– 

DRGs to be subject to the IPPS policy for 

replaced devices offered without cost or 

with a credit for FY 2016 is displayed 

below. 

PROPOSED LIST OF MS–DRGS SUBJECT TO THE IPPS POLICY FOR REPLACED DEVICES OFFERED WITHOUT COST OR

WITH A CREDIT

MDC MS– 

DRG MS–DRG Title 

PreMDC ....... 001 Heart Transplant or Implant of Heart Assist System with MCC. 

PreMDC ....... 002 Heart Transplant or Implant of Heart Assist System without MCC. 

MDC 01 ........ 023 Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant. 

MDC 01 ........ 024 Craniotomy with Major Device Implant/Acute Complex CNS PDX without MCC. 

MDC 01 ........ 025 Craniotomy & Endovascular Intracranial Procedures with MCC. 

MDC 01 ........ 026 Craniotomy & Endovascular Intracranial Procedures with CC. 

MDC 01 ........ 027 Craniotomy & Endovascular Intracranial Procedures without CC/MCC. 

MDC 01 ........ 040 Peripheral/Cranial Nerve & Other Nervous System Procedures with MCC. 

MDC 01 ........ 041 Peripheral/Cranial Nerve & Other Nervous System Procedures with CC or Peripheral Neurostimulation. 

MDC 01 ........ 042 Peripheral/Cranial Nerve & Other Nervous System Procedures without CC/MCC. 

MDC 03 ........ 129 Major Head & Neck Procedures with CC/MCC or Major Device. 

MDC 03 ........ 130 Major Head & Neck Procedures without CC/MCC. 

MDC 05 ........ 215 Other Heart Assist System Implant. 

MDC 05 ........ 216 Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with MCC. 

MDC 05 ........ 217 Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization with CC. 

MDC 05 ........ 218 Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac Catheterization without CC/MCC. 

MDC 05 ........ 219 Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with MCC. 

MDC 05 ........ 220 Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization with CC. 

MDC 05 ........ 221 Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac Catheterization without CC/MCC. 

MDC 05 ........ 222 Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock with MCC. 

MDC 05 ........ 223 Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/HF/Shock without MCC. 

MDC 05 ........ 224 Cardiac Defibrillator Implant with Cardiac Catheterization without AMI/HF/Shock with MCC. 

MDC 05 ........ 225 Cardiac Defibrillator Implant with Cardiac Catheterization without AMI/HF/Shock without MCC. 

MDC 05 ........ 226 Cardiac Defibrillator Implant without Cardiac Catheterization with MCC. 

MDC 05 ........ 227 Cardiac Defibrillator Implant without Cardiac Catheterization without MCC. 

MDC 05 ........ 242 Permanent Cardiac Pacemaker Implant with MCC. 

MDC 05 ........ 243 Permanent Cardiac Pacemaker Implant with CC. 

MDC 05 ........ 244 Permanent Cardiac Pacemaker Implant without CC/MCC. 

MDC 05 ........ 245 AICD Generator Procedures. 

MDC 05 ........ 258 Cardiac Pacemaker Device Replacement with MCC. 


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PROPOSED LIST OF MS–DRGS SUBJECT TO THE IPPS POLICY FOR REPLACED DEVICES OFFERED WITHOUT COST OR

WITH A CREDIT—Continued 

MDC MS– 

DRG MS–DRG Title 

MDC 05 ........ 259 Cardiac Pacemaker Device Replacement without MCC. 

MDC 05 ........ 260 Cardiac Pacemaker Revision Except Device Replacement with MCC. 

MDC 05 ........ 261 Cardiac Pacemaker Revision Except Device Replacement with CC. 

MDC 05 ........ 262 Cardiac Pacemaker Revision Except Device Replacement without CC/MCC. 

MDC 05 ........ 265 AICD Lead Procedures. 

MDC 05 ........ 266 Endovascular Cardiac Valve Replacement with MCC. 

MDC 05 ........ 267 Endovascular Cardiac Valve Replacement without MCC. 

MDC 05 ........ 268 Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC. 

MDC 05 ........ 269 Aortic and Heart Assist Procedures Except Pulsation Balloon without MCC. 

MDC 05 ........ 270 Other Major Cardiovascular Procedures with MCC. 

MDC 05 ........ 271 Other Major Cardiovascular Procedures with CC. 

MDC 05 ........ 272 Other Major Cardiovascular Procedures without CC/MCC. 

MDC 08 ........ 461 Bilateral or Multiple Major Joint Procedures of Lower Extremity with MCC. 

MDC 08 ........ 462 Bilateral or Multiple Major Joint Procedures of Lower Extremity without MCC. 

MDC 08 ........ 466 Revision of Hip or Knee Replacement with MCC. 

MDC 08 ........ 467 Revision of Hip or Knee Replacement with CC. 

MDC 08 ........ 468 Revision of Hip or Knee Replacement without CC/MCC. 

MDC 08 ........ 469 Major Joint Replacement or Reattachment of Lower Extremity with MCC. 

MDC 08 ........ 470 Major Joint Replacement or Reattachment of Lower Extremity without MCC. 

We are inviting public comments on 

our proposed list of MS–DRGs to be 

subject to the IPPS policy for replaced 

devices offered without cost or with a 

credit for FY 2016. The final list will be 

included in the FY 2016 IPPS/LTCH 

PPS final rule and also will be issued to 

providers in the form of a Change 

Request (CR). 

H. Recalibration of the Proposed FY 

2016 MS–DRG Relative Weights 

1. Data Sources for Developing the 

Relative Weights 

In developing the proposed FY 2016 

system of weights, we used two data 

sources: Claims data and cost report 

data. As in previous years, the claims 

data source is the MedPAR file. This file 

is based on fully coded diagnostic and 

procedure data for all Medicare 

inpatient hospital bills. The FY 2014 

MedPAR data used in this proposed rule 

include discharges occurring on October 

1, 2013, through September 30, 2014, 

based on bills received by CMS through 

December 31, 2014, from all hospitals 

subject to the IPPS and short-term, acute 

care hospitals in Maryland (which at 

that time were under a waiver from the 

IPPS). The FY 2014 MedPAR file used 

in calculating the proposed relative 

weights includes data for approximately 

9,638,230 Medicare discharges from 

IPPS providers. Discharges for Medicare 

beneficiaries enrolled in a Medicare 

Advantage managed care plan are 

excluded from this analysis. These 

discharges are excluded when the 

MedPAR ‘‘GHO Paid’’ indicator field on 

the claim record is equal to ‘‘1’’ or when 

the MedPAR DRG payment field, which 

represents the total payment for the 

claim, is equal to the MedPAR ‘‘Indirect 

Medical Education (IME)’’ payment 

field, indicating that the claim was an 

‘‘IME only’’ claim submitted by a 

teaching hospital on behalf of a 

beneficiary enrolled in a Medicare 

Advantage managed care plan. In 

addition, the December 31, 2014 update 

of the FY 2014 MedPAR file complies 

with version 5010 of the X12 HIPAA 

Transaction and Code Set Standards, 

and includes a variable called ‘‘claim 

type.’’ Claim type ‘‘60’’ indicates that 

the claim was an inpatient claim paid as 

fee-for-service. Claim types ‘‘61,’’ ‘‘62,’’ 

‘‘63,’’ and ‘‘64’’ relate to encounter 

claims, Medicare Advantage IME 

claims, and HMO no-pay claims. 

Therefore, the calculation of the 

proposed relative weights for FY 2016 

also excludes claims with claim type 

values not equal to ‘‘60.’’ The data 

exclude CAHs, including hospitals that 

subsequently became CAHs after the 

period from which the data were taken. 

We note that the proposed FY 2016 

relative weights are based on the ICD– 

9–CM diagnoses and procedures codes 

from the MedPAR claims data, grouped 

through the ICD–9–CM version of the 

FY 2016 GROUPER (Version 33). The 

second data source used in the costbased relative weighting methodology is 

the Medicare cost report data files from 

the HCRIS. Normally, we use the HCRIS 

dataset that is 3 years prior to the IPPS 

fiscal year. Specifically, we used cost 

report data from the December 31, 2014 

update of the FY 2013 HCRIS for 

calculating the proposed FY 2016 costbased relative weights. 

2. Methodology for Calculation of the 

Proposed Relative Weights 

As we explain in section II.E.3. of the 

preamble of this proposed rule, we 

calculated the FY 2016 relative weights 

based on 19 CCRs, as we did for FY 

2015. The methodology we used to 

calculate the proposed FY 2016 MS– 

DRG cost-based relative weights based 

on claims data in the FY 2014 MedPAR 

file and data from the FY 2013 Medicare 

cost reports is as follows: 

• To the extent possible, all the 

claims were regrouped using the 

proposed FY 2016 MS–DRG 

classifications discussed in sections II.B. 

and II.G. of the preamble of this 

proposed rule. 

• The transplant cases that were used 

to establish the relative weights for heart 

and heart-lung, liver and/or intestinal, 

and lung transplants (MS–DRGs 001, 

002, 005, 006, and 007, respectively) 

were limited to those Medicareapproved transplant centers that have 

cases in the FY 2014 MedPAR file. 

(Medicare coverage for heart, heart-lung, 

liver and/or intestinal, and lung 

transplants is limited to those facilities 

that have received approval from CMS 

as transplant centers.) 

• Organ acquisition costs for kidney, 

heart, heart-lung, liver, lung, pancreas, 

and intestinal (or multivisceral organs) 

transplants continue to be paid on a 

reasonable cost basis. Because these 

acquisition costs are paid separately 

from the prospective payment rate, it is 

necessary to subtract the acquisition 

charges from the total charges on each 

transplant bill that showed acquisition 

charges before computing the average 


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cost for each MS–DRG and before 

eliminating statistical outliers. 

• Claims with total charges or total 

lengths of stay less than or equal to zero 

were deleted. Claims that had an 

amount in the total charge field that 

differed by more than $10.00 from the 

sum of the routine day charges, 

intensive care charges, pharmacy 

charges, special equipment charges, 

therapy services charges, operating 

room charges, cardiology charges, 

laboratory charges, radiology charges, 

other service charges, labor and delivery 

charges, inhalation therapy charges, 

emergency room charges, blood charges, 

and anesthesia charges were also 

deleted. 

• At least 92.1 percent of the 

providers in the MedPAR file had 

charges for 14 of the 19 cost centers. All 

claims of providers that did not have 

charges greater than zero for at least 14 

of the 19 cost centers were deleted. In 

other words, a provider must have no 

more than five blank cost centers. If a 

provider did not have charges greater 

than zero in more than five cost centers, 

the claims for the provider were deleted. 

(We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 49911) for 

the edit threshold related to FY 2015.) 

• Statistical outliers were eliminated 

by removing all cases that were beyond 

3.0 standard deviations from the 

geometric mean of the log distribution 

of both the total charges per case and 

the total charges per day for each MS– 

DRG. 

• Effective October 1, 2008, because 

hospital inpatient claims include a POA 

indicator field for each diagnosis 

present on the claim, only for purposes 

of relative weight-setting, the POA 

indicator field was reset to ‘‘Y’’ for 

‘‘Yes’’ for all claims that otherwise have 

an ‘‘N’’ (No) or a ‘‘U’’ (documentation 

insufficient to determine if the 

condition was present at the time of 

inpatient admission) in the POA field. 

Under current payment policy, the 

presence of specific HAC codes, as 

indicated by the POA field values, can 

generate a lower payment for the claim. 

Specifically, if the particular condition 

is present on admission (that is, a ‘‘Y’’ 

indicator is associated with the 

diagnosis on the claim), it is not a HAC, 

and the hospital is paid for the higher 

severity (and, therefore, the higher 

weighted MS–DRG). If the particular 

condition is not present on admission 

(that is, an ‘‘N’’ indicator is associated 

with the diagnosis on the claim) and 

there are no other complicating 

conditions, the DRG GROUPER assigns 

the claim to a lower severity (and, 

therefore, the lower weighted MS–DRG) 

as a penalty for allowing a Medicare 

inpatient to contract a HAC. While the 

POA reporting meets policy goals of 

encouraging quality care and generates 

program savings, it presents an issue for 

the relative weight-setting process. 

Because cases identified as HACs are 

likely to be more complex than similar 

cases that are not identified as HACs, 

the charges associated with HAC cases 

are likely to be higher as well. 

Therefore, if the higher charges of these 

HAC claims are grouped into lower 

severity MS–DRGs prior to the relative 

weight-setting process, the relative 

weights of these particular MS–DRGs 

would become artificially inflated, 

potentially skewing the relative weights. 

In addition, we want to protect the 

integrity of the budget neutrality process 

by ensuring that, in estimating 

payments, no increase to the 

standardized amount occurs as a result 

of lower overall payments in a previous 

year that stem from using weights and 

case-mix that are based on lower 

severity MS–DRG assignments. If this 

would occur, the anticipated cost 

savings from the HAC policy would be 

lost. 

To avoid these problems, we reset the 

POA indicator field to ‘‘Y’’ only for 

relative weight-setting purposes for all 

claims that otherwise have an ‘‘N’’ or a 

‘‘U’’ in the POA field. This resetting 

‘‘forced’’ the more costly HAC claims 

into the higher severity MS–DRGs as 

appropriate, and the relative weights 

calculated for each MS–DRG more 

closely reflect the true costs of those 

cases. 

In addition, in the FY 2013 IPPS/

LTCH PPS final rule, for FY 2013 and 

subsequent fiscal years, we finalized a 

policy to treat hospitals that participate 

in the Bundled Payments for Care 

Improvement (BPCI) initiative the same 

as prior fiscal years for the IPPS 

payment modeling and ratesetting 

process without regard to hospitals’ 

participation within these bundled 

payment models (that is, as if hospitals 

were not participating in those models 

under the BPCI initiative). The BPCI 

initiative, developed under the 

authority of section 3021 of the 

Affordable Care Act (codified at section 

1115A of the Act), is comprised of four 

broadly defined models of care, which 

link payments for multiple services 

beneficiaries receive during an episode 

of care. Under the BPCI initiative, 

organizations enter into payment 

arrangements that include financial and 

performance accountability for episodes 

of care. For FY 2016, we are proposing 

to continue to include all applicable 

data from subsection (d) hospitals 

participating in BPCI Models 1, 2, and 

4 in our IPPS payment modeling and 

ratesetting calculations. We refer readers 

to the FY 2013 IPPS/LTCH PPS final 

rule for a complete discussion on our 

final policy for the treatment of 

hospitals participating in the BPCI 

initiative in our ratesetting process. For 

additional information on the BPCI 

initiative, we refer readers to the CMS’ 

Center for Medicare and Medicaid 

Innovation’s Web site at: http://

innovation.cms.gov/initiatives/BundledPayments/index.html and to section 

IV.H.4. of the preamble of the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53341 

through 53343). 

Once the MedPAR data were trimmed 

and the statistical outliers were 

removed, the charges for each of the 19 

cost groups for each claim were 

standardized to remove the effects of 

differences in area wage levels, IME and 

DSH payments, and for hospitals 

located in Alaska and Hawaii, the 

applicable cost-of-living adjustment. 

Because hospital charges include 

charges for both operating and capital 

costs, we standardized total charges to 

remove the effects of differences in 

geographic adjustment factors, cost-ofliving adjustments, and DSH payments 

under the capital IPPS as well. Charges 

were then summed by MS–DRG for each 

of the 19 cost groups so that each MS– 

DRG had 19 standardized charge totals. 

These charges were then adjusted to 

cost by applying the national average 

CCRs developed from the FY 2013 cost 

report data. 

The 19 cost centers that we used in 

the proposed relative weight calculation 

are shown in the following table. The 

table shows the lines on the cost report 

and the corresponding revenue codes 

that we used to create the 19 national 

cost center CCRs. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24412 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

Cost center 

group name 

(19 total) 

MedPAR charge 

field 

Revenue codes 

contained in 

MedPAR 

charge field 

Cost report 

line description 

Cost from 

HCRIS 

(Worksheet C, 

Part 1, 

Column 5 

and line 

number) 

Form 

CMS–2552–10 

Charges from 

HCRIS 

(Worksheet C, 

Part 1, 

Column 6 & 7 

and line 

number) 

Form 

CMS–2552–10 

Medicare 

charges from 

HCRIS 

(Worksheet D–3, 

Column & line 

number) 

Form 

CMS–2552–10 

Routine Days ......... Private Room 

Charges.

011X and 014X ...... Adults & Pediatrics 

(General Routine 

Care).

C_1_C5_30 ....... C_1_C6_30 ....... D3_HOS_C2_30 

Semi–Private Room 

Charges.

012X, 013X and 

016X–019X.

................................ ........................... ...........................

Ward Charges ........ 015X ...................... ................................ ........................... ...........................

Intensive Days ....... Intensive Care 

Charges.

020X ...................... Intensive Care Unit C_1_C5_31 ....... C_1_C6_31 ....... D3_HOS_C2_31 

Coronary Care 

Charges.

021X ...................... Coronary Care Unit C_1_C5_32 ....... C_1_C6_32 ....... D3_HOS_C2_32 

Burn Intensive Care 

Unit.

C_1_C5_33 ....... C_1_C6_33 ....... D3_HOS_C2_33 

Surgical Intensive 

Care Unit.

C_1_C5_34 ....... C_1_C6_34 ....... D3_HOS_C2_34 

Other Special Care 

Unit.

C_1_C5_35 ....... C_1_C6_35 ....... D3_HOS_C2_35 

Drugs ..................... Pharmacy Charges 025X, 026X and 

063X.

Intravenous Therapy.C_1_C5_64 ....... C_1_C6_64 .......

C_1_C7_64 

D3_HOS_C2_64 

Drugs Charged To 

Patient.

C_1_C5_73 ....... C_1_C6_73 .......

C_1_C7_73 

D3_HOS_C2_73 

Supplies and Equipment.Medical/Surgical 

Supply Charges.

0270, 0271, 0272, 

0273, 0274, 

0277, 0279, and 

0621, 0622, 0623.

Medical Supplies 

Charged to Patients.

C_1_C5_71 ....... C_1_C6_71 .......

C_1_C7_71 

D3_HOS_C2_71 

Durable Medical 

Equipment 

Charges.

0290, 0291, 0292 

and 0294–0299.

DME–Rented ......... C_1_C5_96 ....... C_1_C6_96 .......

C_1_C7_96 

D3_HOS_C2_96 

Used Durable Medical Charges.0293 ....................... DME–Sold .............. C_1_C5_97 ....... C_1_C6_97 .......

C_1_C7_97 

D3_HOS_C2_97 

Implantable Devices 0275, 0276, 0278, 

0624.

Implantable Devices 

Charged to Patients.

C_1_C5_72 ....... C_1_C6_72 .......

C_1_C7_72 

D3_HOS_C2_72 

Therapy Services ... Physical Therapy 

Charges.

042X ...................... Physical Therapy ... C_1_C5_66 ....... C_1_C6_66 .......

C_1_C7_66 

D3_HOS_C2_66 

Occupational Therapy Charges.043X ...................... Occupational Therapy.C_1_C5_67 ....... C_1_C6_67 .......

C_1_C7_67 

D3_HOS_C2_67 

Speech Pathology 

Charges.

044X and 047X ...... Speech Pathology C_1_C5_68 ....... C_1_C6_68 .......

C_1_C7_68 

D3_HOS_C2_68 

Inhalation Therapy Inhalation Therapy 

Charges.

041X and 046X ...... Respiratory Therapy.C_1_C5_65 ....... C_1_C6_65 .......

C_1_C7_65 

D3_HOS_C2_65 

Operating Room .... Operating Room 

Charges.

036X ...................... Operating Room .... C_1_C5_50 ....... C_1_C6_50 .......

C_1_C7_50 

D3_HOS_C2_50 

071X ...................... Recovery Room ..... C_1_C5_51 ....... C_1_C6_51 ....... D3_HOS_C2_51 

C_1_C7_51 

Labor & Delivery .... Operating Room 

Charges.

072X ...................... Delivery Room and 

Labor Room.

C_1_C5_52 ....... C_1_C6_52 .......

C_1_C7_52 

D3_HOS_C2_52 

Anesthesia ............. Anesthesia Charges 037X ...................... Anesthesiology ...... C_1_C5_53 ....... C_1_C6_53 ....... D3_HOS_C2_53 

C_1_C7_53 

Cardiology .............. Cardiology Charges 048X and 073X ...... Electro-cardiology .. C_1_C5_69 ....... C_1_C6_69 ....... D3_HOS_C2_69 

C_1_C7_69 

Cardiac Catheterization.0481 ....................... Cardiac Catheterization.C_1_C5_59 ....... C_1_C6_59 .......

C_1_C7_59 

D3_HOS_C2_59 

Laboratory .............. Laboratory Charges 030X, 031X, and 

075X.

Laboratory .............. C_1_C5_60 ....... C_1_C6_60 .......

C_1_C7_60 

D3_HOS_C2_60 

PBP Clinic Laboratory Services.C_1_C5_61 ....... C_1_C6_61 .......

C_1_C7_61 

D3_HOS_C2_61 

074X, 086X ............ Electro-Encephalography.C_1_C5_70 ....... C_1_C6_70 .......

C_1_C7_70 

D3_HOS_C2_70 

Radiology ............... Radiology Charges 032X, 040X ............ Radiology—Diagnostic.C_1_C5_54 ....... C_1_C6_54 .......

C_1_C7_54 

D3_HOS_C2_54 

028X, 0331, 0332, 

0333, 0335, 

0339, 0342.

Radiology—Therapeutic.C_1_C5_55 ....... C_1_C6_55 ....... D3_HOS_C2_55 

0343 and 344 ........ Radioisotope .......... C_1_C5_56 ....... C_1_C6_56 .......

C_1_C7_56 

D3_HOS_C2_56 

Computed Tomography (CT) Scan.CT Scan Charges .. 035X ...................... Computed Tomography (CT) Scan.C_1_C5_57 ....... C_1_C6_57 .......

C_1_C7_57 

D3_HOS_C2_57 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24413 

Cost center 

group name 

(19 total) 

MedPAR charge 

field 

Revenue codes 

contained in 

MedPAR 

charge field 

Cost report 

line description 

Cost from 

HCRIS 

(Worksheet C, 

Part 1, 

Column 5 

and line 

number) 

Form 

CMS–2552–10 

Charges from 

HCRIS 

(Worksheet C, 

Part 1, 

Column 6 & 7 

and line 

number) 

Form 

CMS–2552–10 

Medicare 

charges from 

HCRIS 

(Worksheet D–3, 

Column & line 

number) 

Form 

CMS–2552–10 

Magnetic Resonance Imaging 

(MRI).

MRI Charges .......... 061X ...................... Magnetic Resonance Imaging 

(MRI).

C_1_C5_58 ....... C_1_C6_58 .......

C_1_C7_58 

D3_HOS_C2_58 

Emergency Room .. Emergency Room 

Charges.

045X ...................... Emergency ............. C_1_C5_91 ....... C_1_C6_91 .......

C_1_C7_91 

D3_HOS_C2_91 

Blood and Blood 

Products.

Blood Charges ....... 038X ...................... Whole Blood & 

Packed Red 

Blood Cells.

C_1_C5_62 ....... C_1_C6_62 .......

C_1_C7_62 

D3_HOS_C2_62 

Blood Storage/Processing.039X ...................... Blood Storing, Processing, & 

Transfusing.

C_1_C5_63 ....... C_1_C6_63 .......

C_1_C7_63 

D3_HOS_C2_63 

Other Services ....... Other Service 

Charge.

0002–0099, 022X, 

023X, 

024X,052X,053X.

................................ ........................... ...........................

055X–060X, 064X– 

070X, 076X– 

078X, 090X– 

095X and 099X.

................................ ........................... ...........................

Renal Dialysis ........ 0800X .................... Renal Dialysis ........ C_1_C5_74 ....... C_1_C6_74 ....... D3_HOS_C2_74 

ESRD Revenue 

Setting Charges.

080X and 082X– 

088X.

................................ ........................... C_1_C7_74 

Home Program Dialysis.C_1_C5_94 ....... C_1_C6_94 .......

C_1_C7_94 

D3_HOS_C2_94 

Outpatient Service 

Charges.

049X ...................... ASC (Non Distinct 

Part).

C_1_C5_75 ....... C_1_C6_75 ....... D3_HOS_C2_75 

Lithotripsy Charge .. 079X ...................... ................................ ........................... C_1_C7_75 

Other Ancillary ....... C_1_C5_76 ....... C_1_C6_76 .......

C_1_C7_76 

D3_HOS_C2_76 

Clinic Visit Charges 051X ...................... Clinic ...................... C_1_C5_90 ....... C_1_C6_90 .......

C_1_C7_90 

D3_HOS_C2_90 

Observation beds ... C_1_C5_92.01 .. C_1_C6_92.01 ..

C_1_C7_92.01 

D3_HOS_C2_

92.01 

Professional Fees 

Charges.

096X, 097X, and 

098X.

Other Outpatient 

Services.

C_1_C5_93 ....... C_1_C6_93 .......

C_1_C7_93 

D3_HOS_C2_93 

Ambulance 

Charges.

054X ...................... Ambulance ............. C_1_C5_95 ....... C_1_C6_95 .......

C_1_C7_95 

D3_HOS_C2_95 

Rural Health Clinic C_1_C5_88 ....... C_1_C6_88 .......

C_1_C7_88 

D3_HOS_C2_88 

FQHC ..................... C_1_C5_89 ....... C_1_C6_89 .......

C_1_C7_89 

D3_HOS_C2_89 

We refer readers to the FY 2009 IPPS/ 

LTCH PPS final rule (73 FR 48462) for 

a discussion on the revenue codes 

included in the Supplies and 

Equipment and Implantable Devices 

CCRs, respectively. 

3. Development of National Average 

CCRs 

We developed the national average 

CCRs as follows: 

Using the FY 2013 cost report data, 

we removed CAHs, Indian Health 

Service hospitals, all-inclusive rate 

hospitals, and cost reports that 

represented time periods of less than 1 

year (365 days). We included hospitals 

located in Maryland because we include 

their charges in our claims database. We 

then created CCRs for each provider for 

each cost center (see prior table for line 

items used in the calculations) and 

removed any CCRs that were greater 

than 10 or less than 0.01. We 

normalized the departmental CCRs by 

dividing the CCR for each department 

by the total CCR for the hospital for the 

purpose of trimming the data. We then 

took the logs of the normalized cost 

center CCRs and removed any cost 

center CCRs where the log of the cost 

center CCR was greater or less than the 

mean log plus/minus 3 times the 

standard deviation for the log of that 

cost center CCR. Once the cost report 

data were trimmed, we calculated a 

Medicare-specific CCR. The Medicarespecific CCR was determined by taking 

the Medicare charges for each line item 

from Worksheet D–3 and deriving the 

Medicare-specific costs by applying the 

hospital-specific departmental CCRs to 

the Medicare-specific charges for each 

line item from Worksheet D–3. Once 

each hospital’s Medicare-specific costs 

were established, we summed the total 

Medicare-specific costs and divided by 

the sum of the total Medicare-specific 

charges to produce national average, 

charge-weighted CCRs. 

After we multiplied the total charges 

for each MS–DRG in each of the 19 cost 

centers by the corresponding national 

average CCR, we summed the 19 ‘‘costs’’ 

across each MS–DRG to produce a total 

standardized cost for the MS–DRG. The 

average standardized cost for each MS– 

DRG was then computed as the total 

standardized cost for the MS–DRG 

divided by the transfer-adjusted case 

count for the MS–DRG. The average cost 

for each MS–DRG was then divided by 

the national average standardized cost 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24414 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

per case to determine the relative 

weight. 

The proposed FY 2016 cost-based 

relative weights were then normalized 

by an adjustment factor of 1.678672 so 

that the average case weight after 

recalibration was equal to the average 

case weight before recalibration. The 

normalization adjustment is intended to 

ensure that recalibration by itself 

neither increases nor decreases total 

payments under the IPPS, as required by 

section 1886(d)(4)(C)(iii) of the Act. 

The proposed 19 national average 

CCRs for FY 2016 are as follows: 

Group CCR 

Routine Days .................................... 0.485 

Intensive Days .................................. 0.399 

Drugs ................................................ 0.192 

Supplies & Equipment ...................... 0.299 

Implantable Devices ......................... 0.344 

Therapy Services .............................. 0.335 

Laboratory ......................................... 0.125 

Operating Room ............................... 0.201 

Cardiology ......................................... 0.119 

Cardiac Catheterization .................... 0.125 

Radiology .......................................... 0.159 

MRIs ................................................. 0.085 

CT Scans .......................................... 0.041 

Emergency Room ............................. 0.184 

Blood and Blood Products ................ 0.340 

Other Services .................................. 0.367 

Labor & Delivery ............................... 0.404 

Group CCR 

Inhalation Therapy ............................ 0.178 

Anesthesia ........................................ 0.108 

Since FY 2009, the relative weights 

have been based on 100 percent cost 

weights based on our MS–DRG grouping 

system. 

When we recalibrated the DRG 

weights for previous years, we set a 

threshold of 10 cases as the minimum 

number of cases required to compute a 

reasonable weight. For FY 2016, we are 

proposing to use that same case 

threshold in recalibrating the MS–DRG 

relative weights for FY 2016. Using data 

from the FY 2014 MedPAR file, there 

were 8 MS–DRGs that contain fewer 

than 10 cases. Under the MS–DRGs, we 

have fewer low-volume DRGs than 

under the CMS DRGs because we no 

longer have separate DRGs for patients 

aged 0 to 17 years. With the exception 

of newborns, we previously separated 

some DRGs based on whether the 

patient was age 0 to 17 years or age 17 

years and older. Other than the age split, 

cases grouping to these DRGs are 

identical. The DRGs for patients aged 0 

to 17 years generally have very low 

volumes because children are typically 

ineligible for Medicare. In the past, we 

have found that the low volume of cases 

for the pediatric DRGs could lead to 

significant year-to-year instability in 

their relative weights. Although we have 

always encouraged non-Medicare payers 

to develop weights applicable to their 

own patient populations, we have 

received frequent complaints from 

providers about the use of the Medicare 

relative weights in the pediatric 

population. We believe that eliminating 

this age split in the MS–DRGs will 

provide more stable payment for 

pediatric cases by determining their 

payment using adult cases that are 

much higher in total volume. Newborns 

are unique and require separate MS– 

DRGs that are not mirrored in the adult 

population. Therefore, it remains 

necessary to retain separate MS–DRGs 

for newborns. All of the low-volume 

MS–DRGs listed below are for 

newborns. For FY 2016, because we do 

not have sufficient MedPAR data to set 

accurate and stable cost relative weights 

for these low-volume MS–DRGs, we are 

proposing to compute relative weights 

for the low-volume MS–DRGs by 

adjusting their final FY 2015 relative 

weights by the percentage change in the 

average weight of the cases in other MS– 

DRGs. The crosswalk table is shown 

below: 

Low-volume 

MS–DRG MS–DRG Title Crosswalk to MS–DRG 

768 ............... Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C.Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

789 ............... Neonates, Died or Transferred to Another 

Acute Care Facility.

Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

790 ............... Extreme Immaturity or Respiratory Distress Syndrome, Neonate.Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

791 ............... Prematurity with Major Problems .............. Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

792 ............... Prematurity without Major Problems ......... Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

793 ............... Full-Term Neonate with Major Problems .. Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

794 ............... Neonate with Other Significant Problems Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS DRGs). 

795 ............... Normal Newborn ....................................... Final FY 2015 relative weight (adjusted by percent change in average weight of the 

cases in other MS-DRGs). 

We are inviting public comments on 

this proposal. 

4. Solicitation of Public Comments on 

Expanding the Bundled Payments for 

Care Improvement (BPCI) Initiative 

a. Background 

Since 2011, CMS has been working to 

develop and test models of bundling 

Medicare payments under the authority 

of section 1115A of the Act. Through 

these models, CMS plans to evaluate 

whether bundled payments result in 

higher quality and more coordinated 

care at a lower cost to Medicare. CMS 

is currently testing the Bundled 

Payments for Care Improvement (BPCI) 

initiative. Under this initiative, 

organizations enter into payment 

arrangements that include financial and 

performance accountability for episodes 

of care. 

The BPCI initiative is comprised of 

four related payment models, which 

link payments for multiple services that 

Medicare beneficiaries receive during an 

episode of care into a bundled payment. 

Episodes of care under the BPCI 

initiative begin with either (1) an 

inpatient hospital stay or (2) postacute 

care services following a qualifying 

inpatient hospital stay. More 

information on the four models under 

the BPCI initiative can be found on the 

CMS Center for Medicare and Medicaid 

Innovation’s Web site at: http://

innovation.cms.gov/initiatives/bundledpayments/. We also have included 

discussions of the BPCI initiative in the 

annual IPPS/LTCH PPS rulemakings 

since FY 2013 (77 FR 53341 through 

53343). 

All four models in the BPCI initiative 

pay a discounted bundled payment for 


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a single episode of care as an alternative 

approach to payment for service 

delivery under traditional Medicare feefor-service (FFS). Model 1 participants 

are paid a discounted bundled payment 

in lieu of the standard IPPS payment 

upon submission of claims. In Models 2 

and 3, the bundled payment is paid 

retrospectively through a reconciliation 

process; participants continue to submit 

claims and receive payment via the 

usual Medicare FFS payment systems. 

In Model 4, the bundled payment is 

made prospectively to a hospital, and 

participating physician and 

nonphysician practitioners submit ‘‘nopay’’ claims to CMS. In all models, 

participants in the BPCI initiative are 

permitted to share gains arising from the 

providers’ care redesign efforts under 

certain circumstances in which such 

arrangements would not otherwise be 

permitted under Medicare. 

Each of the four models in the BPCI 

initiative tests bundled payments for a 

different episode of care: 

• Model 1 tests retrospective bundled 

payments for the acute care hospital 

stay only. All participants in this model 

are acute care hospitals, and the episode 

of care is defined as the inpatient stay 

in the acute care hospital. The hospital 

is paid a discounted amount based on 

the payment rates established under the 

IPPS used in the original Medicare 

program. Physicians are paid separately 

for their services under the Medicare 

Physician Fee Schedule (MPFS). 

While Model 1 makes payments as 

described above for all MS–DRGs, 

Models 2, 3, and 4 of the BPCI initiative 

test 48 episodes (comprised of 

groupings of related MS–DRGs). These 

episodes and the groupings of related 

MS–DRGs that are included in these 

episodes are listed in the table below. 

• In Model 2, the episode of care 

includes the inpatient stay in an acute 

care hospital and all related services 

during the episode, including postacute 

care services. The episode ends either 

30, 60, or 90 days after a hospital 

discharge. 

• Model 3 focuses on postacute care 

services. In this model, the episode of 

care is triggered by an acute care 

hospital stay for an MS–DRG included 

in the episode and begins at the 

initiation of postacute care services in a 

skilled nursing facility (SNF), inpatient 

rehabilitation facility (IRF), long-term 

care hospital (LTCH), or home health 

agency (HHA). The episode includes 

postacute care services, physicians’ 

services, and related services provided 

during an inpatient hospital 

readmission, but does not include 

services provided during the episodeinitiating acute care hospital stay. The 

postacute care services included in the 

episode must begin within 30 days of 

discharge from the inpatient hospital 

stay and may end either 30, 60, or 90 

days after the initiation of the episode. 

• Model 4 tests prospective single 

bundled payments for physicians’ 

services and hospital services furnished 

during an acute care hospitalization and 

related readmissions. Under this model, 

a single, prospectively determined 

bundled payment is made to the 

participating hospital that encompasses 

all services furnished during the 

inpatient stay by the hospital, 

physicians, and other practitioners. 

Payments for services furnished in 

related readmissions for 30 days after 

the hospital discharge are included in 

the bundled payment amount. 

Model 1 of the BPCI initiative began 

in April 2013. CMS has allowed for 

participation in two phases in Models 2, 

3, and 4. The first phase is the 

preparatory phase. In the preparatory 

phase, participants in the BPCI initiative 

are provided claims data so that they 

may analyze patterns of care for 

episodes in preparation for improving 

care coordination and quality under 

bundled payments prior to participation 

in the second phase, the risk-bearing 

phase. 

In the BPCI initiative, the term ‘‘riskbearing’’ refers to the requirement that 

certain participants in the BPCI 

initiative bear financial risk for 

spending above the target price set by 

Medicare across the episodes of care in 

which they participate. By using this 

term, we do not connote any 

relationship to insurance; we narrowly 

define this term and use it only to 

highlight the following financial 

responsibilities: In the risk-bearing 

phase, awardees and awardee conveners 

in Models 2 and 3 are financially 

responsible to Medicare if FFS 

expenditures are higher than a target 

price established by Medicare for the 

episode(s) in which they are 

participating. Awardees assume risk on 

behalf of themselves; awardee 

conveners assume risk on behalf of 

others and, in some cases, themselves 

(as described below). Medicare will 

recoup the difference between the target 

price and the actual FFS expenditures 

from awardees and awardee conveners 

for all services included in the episode 

of care if the target price is exceeded. 

Medicare will pay awardees and 

awardee conveners the difference if 

actual FFS expenditures are below the 

target price. Awardees and awardee 

conveners in Model 4 who have 

assumed risk on behalf of themselves 

and/or others bear risk in that they 

assume financial responsibility if the 

bundled prospective payment from 

Medicare does not cover the services 

included in the episode of care. 

Awardees and all participants under 

awardee conveners in Models 2, 3, and 

4 must move to the risk-bearing phase 

by July 1, 2015. 

There are several entity types 

currently participating in the two 

phases included in the BPCI initiative’s 

Models 2, 3, and 4. Episode initiators, 

defined as the entities that initiate 

episodes of care in Models 2, 3, and 4, 

are provided claims data in the 

preparatory phase so that they may 

establish a structure for bundled 

payments prior to participation in the 

risk-bearing phase of the initiative. The 

entities that initiate episodes of care 

vary by model: In Model 4, episode 

initiators are acute care hospitals only; 

in Model 2, episode initiators are acute 

care hospitals and physician group 

practices; and in Model 3, episode 

initiators are SNFs, HHAs, LTCHs, IRFs, 

and physician group practices. 

To move into the risk-bearing phase, 

participants must be selected by CMS 

following a comprehensive review and 

enter into an agreement with CMS. In 

the risk-bearing phase, episode initiators 

participate through one of two options. 

The first option is that the episode 

initiator may be an awardee and sign an 

agreement directly with CMS containing 

a risk-bearing financial arrangement. 

While not required, risk-bearing episode 

initiators may be associated with a 

‘‘facilitator convener,’’ an entity that 

convenes multiple health care providers 

and supports the episode initiators in 

implementing the BPCI initiative but 

does not itself bear any risk. 

Alternatively, through the second 

option, the episode initiator may 

participate in the BPCI initiative under 

an awardee convener, which is an 

organization that may or may not be a 

Medicare provider that assumes 

financial risk on behalf of the episode 

initiator. In the second option, the 

awardee convener signs an agreement 

with CMS containing the terms of 

participation in the model, including a 

risk-bearing financial arrangement. 

Participation through an awardee 

convener allows episode initiators to 

mitigate their financial risk, and 

participation through an awardee or 

facilitator convener allows episode 

initiators to benefit in many cases from 

the convener’s resources, such as 

enhanced technology and 

administrative assistance. 

As of April 2015, the participation in 

the risk-bearing phase of the BPCI 

initiative is as follows: Model 2 is 

testing 2,053 episodes among 345 

episode initiators located in 45 States; 


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Model 3 is testing 3,407 episodes among 

318 episode initiators located in 29 

States. Model 4 is testing 16 episodes 

among 9 episode initiators located in 7 

States. There are 49 facilitator conveners 

and awardee conveners across the four 

models. In addition to the entities in the 

risk-bearing phase, several thousand 

entities in the preparatory phase are still 

considering whether to enter the 

performance phase, upon successful 

completion of screening and review by 

CMS. 

The episodes of care and the 

associated MS–DRGs that define the 

episodes that are being tested in Models 

2, 3, and 4 of the BPCI initiative are 

listed in the table below. This table is 

based on FY 2015 IPPS MS–DRGs and 

does not account yet for proposed FY 

2016 changes to the MS–DRGs. 

EPISODES OF CARE AND MS–DRG GROUPINGS UNDER THE BUNDLED PAYMENTS FOR CARE IMPROVEMENT INITIATIVE

FOR MODELS 2, 3, AND 4 

Episode of care MS–DRGs 

Acute myocardial infarction ............................................................................................................. 280, 281, 282. 

AICD generator or lead ................................................................................................................... 245, 265. 

Amputation ....................................................................................................................................... 239, 240, 241, 255, 256, 257, 474, 475, 476, 

616, 617, 618. 

Atherosclerosis ................................................................................................................................ 302, 303. 

Back and neck except spinal fusion ................................................................................................ 518, 519, 520. 

Coronary artery bypass graft ........................................................................................................... 231, 232, 233, 234, 235, 236. 

Cardiac arrhythmia .......................................................................................................................... 308, 309, 310. 

Cardiac defibrillator .......................................................................................................................... 222, 223, 224, 225, 226, 227. 

Cardiac valve ................................................................................................................................... 216, 217, 218, 219, 220, 221, 266, 267. 

Cellulitis ........................................................................................................................................... 602, 603. 

Cervical spinal fusion ...................................................................................................................... 471, 472, 473. 

Chest pain ....................................................................................................................................... 313. 

Combined anterior posterior spinal fusion ...................................................................................... 453, 454, 455. 

Complex noncervical spinal fusion .................................................................................................. 456, 457, 458 

Congestive heart failure .................................................................................................................. 291, 292, 293. 

Chronic obstructive pulmonary disease, bronchitis, asthma ........................................................... 190, 191, 192, 202, 203. 

Diabetes ........................................................................................................................................... 637, 638, 639. 

Double joint replacement of the lower extremity ............................................................................. 461, 462. 

Esophagitis, gastroenteritis, and other digestive disorders ............................................................ 391, 392. 

Fractures of the femur and hip or pelvis ......................................................................................... 533, 534, 535, 536. 

Gastrointestinal hemorrhage ........................................................................................................... 377, 378, 379. 

Gastrointestinal obstruction ............................................................................................................. 388, 389, 390. 

Hip and femur procedures except major joint ................................................................................. 480, 481, 482. 

Lower extremity and humerus procedure except hip, foot, femur .................................................. 492, 493, 494. 

Major bowel procedures .................................................................................................................. 329, 330, 331. 

Major cardiovascular procedure ...................................................................................................... 237, 238. 

Major joint replacement of the lower extremity ............................................................................... 469, 470. 

Major joint replacement of the upper extremity .............................................................................. 483. 

Medical noninfectious orthopedic .................................................................................................... 537, 538, 551, 552, 553, 554, 555, 556, 557, 

558, 559, 560, 561, 562, 563. 

Medical peripheral vascular disorders ............................................................................................. 299, 300, 301. 

Nutritional and metabolic disorders ................................................................................................. 640, 641. 

Other knee procedures .................................................................................................................... 485, 486, 487, 488, 489. 

Other respiratory .............................................................................................................................. 189, 204, 205, 206, 207, 208, 186, 187, 188. 

Other vascular surgery .................................................................................................................... 252, 253, 254. 

Pacemaker ....................................................................................................................................... 242, 243, 244. 

Pacemaker device replacement or revision .................................................................................... 258, 259, 260, 261, 262. 

Percutaneous coronary intervention ................................................................................................ 246, 247, 248, 249, 250, 251. 

Red blood cell disorders .................................................................................................................. 811, 812. 

Removal of orthopedic devices ....................................................................................................... 495, 496, 497, 498, 499. 

Renal failure .................................................................................................................................... 682, 683, 684. 

Revision of the hip or knee ............................................................................................................. 466, 467, 468. 

Sepsis .............................................................................................................................................. 870, 871, 872. 

Simple pneumonia and respiratory infections ................................................................................. 177, 178, 179, 193, 194, 195. 

Spinal fusion (noncervical) .............................................................................................................. 459, 460. 

Stroke .............................................................................................................................................. 61, 62, 63, 64, 65, 66. 

Syncope and collapse ..................................................................................................................... 312. 

Transient ischemia .......................................................................................................................... 69. 

Urinary tract infection ...................................................................................................................... 689, 690. 

b. Considerations for Potential Model 

Expansion 

In this FY 2016 IPPS/LTCH PPS 

proposed rule, we are soliciting public 

comments regarding policy and 

operational issues related to a potential 

expansion of the BPCI initiative in the 

future. Section 1115A(c) of the Act, as 

added by section 3021 of the Affordable 

Care Act, provides the Secretary with 

the authority to expand through 

rulemaking the duration and scope of a 

model that is being tested under section 

1115A(b) of the Act, such as the BPCI 

initiative (including implementation on 

a nationwide basis), if the following 

findings are made, taking into account 

the evaluation of the model under 

section 1115A(b)(4) of the Act: (1) The 

Secretary determines that the expansion 

is expected to either reduce Medicare 


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spending without reducing the quality 

of care or improve the quality of patient 

care without increasing spending; (2) 

the CMS Chief Actuary certifies that the 

expansion would reduce (or would not 

result in any increase in) net Medicare 

program spending; and (3) the Secretary 

determines that the expansion would 

not deny or limit the coverage or 

provision of Medicare benefits. The 

decision of whether or not to expand 

will be made by the Secretary in 

coordination with CMS and the Office 

of the Chief Actuary based on whether 

findings about the initiative meet the 

statutory criteria for expansion under 

section 1115A(c) of the Act. 

Evaluation of the BPCI initiative for 

expansion is expected to include 

analyses based on a combination of 

qualitative and quantitative sources, 

including Medicare claims, patient 

surveys, awardee reports, interviews, 

and site visits. Given that further 

evaluation of the BPCI initiative is 

needed to determine its impact on both 

Medicare cost and quality of care, at this 

time, we are not proposing an expansion 

of any models within the initiative or 

any policy changes associated with it. 

Instead, we are requesting public 

comments on issues surrounding a 

potential expansion of the BPCI 

initiative so that we can be prepared in 

the event that the Secretary determines 

that findings from the evaluation of the 

initiative demonstrate that it meets all 

criteria for expansion, consistent with 

the requirements of section 1115A(c) of 

the Act, and that, based on these 

findings and other pertinent factors, 

expansion is warranted. 

CMS is committed to testing new 

payment and service delivery models, 

evaluating results and advancing best 

practices, and engaging stakeholders. 

These three priorities are crucial to the 

BPCI initiative. As we initiate 

discussions about potential expansion, 

we continue to value stakeholder 

engagement within the framework of 

CMS’ priorities for the BPCI initiative. 

Consistent with its ongoing commitment 

to develop new models and refine 

existing models based on additional 

information and experience, CMS may 

modify existing models or test 

additional models under its testing 

authority under section 1115A of the 

Act. It may possibly do so, taking into 

consideration stakeholder input, 

including feedback received through the 

public comments submitted in response 

to the discussion in this section. 

However, the primary goal for this 

solicitation of public comments is to 

receive information about a potential 

expansion of the BPCI initiative. 

Therefore, we are requesting that public 

comments on the discussion in this 

section consider how expanded episode 

payment could continue to encourage 

high-quality, high-value care during 

Medicare beneficiaries’ episodes of care, 

while allowing for accurate payments to 

providers, encouraging coordination of 

care among providers, and ensuring 

access to care and freedom of choice for 

all Medicare beneficiaries, regardless of 

their severity of illness. The following 

list is not an exhaustive list of issues on 

which we are requesting public 

comments, and the inclusion of the list 

of issues is not, in any way, meant to 

imply that any or all of these issues 

would be addressed in any expanded 

model. The solicitation of public 

comments is for planning purposes, and 

as mentioned above, we would use 

additional rulemaking if we decide to 

expand any of the models. 

We are seeking public comments on 

the following issues: 

• Breadth and scope of an expansion. 

For example, whether model expansion 

should focus on one or more of the four 

models or one or more specific 

episodes, or should target specific 

geographic regions of the country. 

Further, would the model best be 

expanded with voluntary participation 

or be most effective if participation were 

required within the chosen models, 

episodes, and regions. 

• Episode definitions. We are seeking 

public comments on the current BPCI 

initiative episode definitions as part of 

an expansion, including the MS–DRGs, 

other bundled services (such as hospital 

readmissions), exclusions, and the 

duration of the episodes. The BPCI 

initiative uses broadly defined episodes, 

and these episodes include MS–DRGs 

that account for approximately 80 

percent of Medicare hospital discharges. 

Depending on the model, lengths of 

episodes may be 30, 60, or 90 days. 

Under all models within the BPCI 

initiative, these episode definitions have 

been standardized across models for 

episodes that relate to an acute care 

hospital stay. An expansion might target 

episodes beginning with inpatient 

hospital care or postacute care. We are 

seeking public comments regarding 

whether episode definition refinements 

should be made; for example, 

refinements potentially could be made 

for episodes that begin with postacute 

care to incorporate the findings from 

standardized patient assessments at 

postacute care initiation, rather than 

tying the episode to the hospital 

discharge diagnosis. 

• Models for expansion. We are 

seeking public comments on whether 

we should consider one or more of the 

current BPCI initiative models as the 

first candidates for expansion. For 

example, under a model expansion, we 

potentially could expand several or all 

of the models that include postacute 

care on a similar timeframe or one 

model at a time. 

• Roles of organizations and 

relationships necessary or beneficial to 

care transformation. We are seeking 

public comments on the roles that 

organizations, including health care 

providers and suppliers and other 

entities, should serve under an 

expanded model. Within this category, 

we are seeking public comments 

specifically on the types of relationships 

and arrangements, financial or 

otherwise, that would assist participants 

with care transformation in an 

expanded model. We would appreciate 

any public comments on whether 

relationships encouraged under an 

expansion could have unintended 

consequences and what those 

consequences might be. 

• Setting bundled payment amounts. 

We are seeking public comments on 

approaches to setting bundled payments 

under model expansion. For 

participants in the BPCI initiative, 

bundled payments are related to the 

historical episode experience of episode 

initiators based on data from 2009 

through 2012. In the BPCI initiative, 

only Model 4 rates are set prospectively, 

while Models 2 and 3 involve trending 

of target amounts following the 

conclusion of episodes. We potentially 

could base payments on regional 

episode experience or set all payments 

prospectively under model expansion. 

We potentially could apply the same 

episode discount percentages to all 

episodes or vary these discount 

percentages based on care redesign 

opportunity in the specific episode. We 

potentially could rebase payments 

annually or on another timeframe. In the 

case of setting payment amounts via a 

specified discount percentage, we are 

seeking public comments on 

methodologies that could be used to 

determine the discount percentages. We 

also are seeking public comments on 

any other methodologies that could be 

considered for the purposes of setting 

bundled payment amounts. 

• Mitigating risk of high-cost cases. 

Depending on the breadth and scope of 

an expansion, the potential financial 

impact of high-cost episode cases could 

be an issue for some providers. 

Currently, under the BPCI initiative, we 

apply a variety of approaches to risk 

mitigation, including allowing 

participants to select risk corridors that 

limit the inclusion of high-cost cases in 

episodes. We are seeking public 

comments on strategies to mitigate the 


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risk of high-cost cases to ensure 

appropriate payment for these episodes 

under model expansion, such as 

through outlier or other policies, while 

encouraging high-value, coordinated 

care for these cases as well. For 

example, under model expansion, we 

potentially could establish an outlier 

pool with specific payment policies, 

similar to approaches under the IPPS 

and the OPPS. 

• Administering bundled payments. 

We are seeking public comments on the 

issues related to prospective or 

retrospective payment under model 

expansion. Currently, Model 4 under 

the BPCI initiative makes a single 

bundled payment, while Models 2 and 

3 utilize routine Medicare FFS 

payments to all providers and supplies 

with retrospective reconciliation for the 

awardee. We are interested in public 

comments on the feasibility of different 

payment approaches under the various 

models, including the administrative 

capacity and feasibility for some 

organizations to pay others for care 

during episodes or to share payments at 

reconciliation. For example, under 

model expansion, we potentially could 

make a single bundled payment in all 

models, but we would need to identify 

the entity to receive the payments and 

engage in widespread changes to the 

shared systems to accommodate all 

payment systems. Under the BPCI 

initiative, we have agreements with 

multiple types of entities, including 

awardee conveners, that may not be 

Medicare providers or suppliers. We are 

requesting comments on the possibility 

of paying an awardee convener the 

bundled payment when that entity did 

not actually deliver health care services 

to the beneficiaries in episodes in an 

expanded model. Specifically, we 

would like to know what operational 

and policy considerations would need 

to be addressed. A retrospective 

reconciliation would have different 

concerns than a prospective payment. 

• Data needs. We are seeking public 

comments on the types of data and 

functionality needed in the marketplace 

in order to expand this type of model 

(for example, EHRs and quality 

measurement, among others). We 

currently provide monthly episode 

claims data to BPCI initiative 

participants for purposes of health care 

operations and periodic monitoring 

reports. Under model expansion, 

providers that are not fully integrated 

may need to develop approaches to 

sharing information regarding patients 

initiating and participating in episodes. 

Real-time information may improve the 

coordination of care. 

• Use of health information 

technology. We are seeking public 

comments on how the use of health 

information technology can be used and 

encouraged in coordinating care across 

care settings, including postacute care. 

Health information technology and 

health information exchange may be 

used to support these models by sharing 

summaries of care, problem lists, 

physician orders, prescription lists, and 

care plans across the care continuum. 

We welcome public comments on how 

to include SNFs, LTCHs, IRFs, and 

HHAs that do not currently utilize 

health information technology and 

health information exchange at an 

advanced level without compromising 

the coordination of care among acute 

care hospitals and postacute care 

providers. 

• Quality measurement and payment 

for value. We are seeking public 

comments on the quality measures that 

could be applied to episodes and 

approaches to incorporating value-based 

payment in the BPCI initiative. For 

example, under model expansion, we 

potentially could apply the same quality 

measures to all episodes or develop 

episode-specific quality measures. We 

potentially could incorporate valuebased payment under model expansion 

by reducing the discount percentage for 

high quality care or increasing the 

discount percentage for low quality 

care. 

• Transition from Medicare FFS 

payments to bundled payments. We are 

seeking public comments on the need 

for and parameters of a transition period 

from Medicare FFS payment to bundled 

payment under an expanded model. We 

are seeking public comments regarding 

the length of any transition and how 

such a transition would be made. 

• Other issues. We are seeking public 

comments on any other issues the 

public believes are important for us to 

consider. 

Consistent with our continuing 

commitment to engaging stakeholders in 

CMS’ work, we are seeking public 

comments on these issues to broaden 

and deepen our understanding of the 

important issues and challenges 

regarding bundled payments in the 

current health care marketplace. These 

public comments also will assist us in 

planning for expansion if a decision is 

made to expand the BPCI initiative in 

the future. 

I. Proposed Add-On Payments for New 

Services and Technologies 

1. Background 

Sections 1886(d)(5)(K) and (L) of the 

Act establish a process of identifying 

and ensuring adequate payment for new 

medical services and technologies 

(sometimes collectively referred to in 

this section as ‘‘new technologies’’) 

under the IPPS. Section 

1886(d)(5)(K)(vi) of the Act specifies 

that a medical service or technology will 

be considered new if it meets criteria 

established by the Secretary after notice 

and opportunity for public comment. 

Section 1886(d)(5)(K)(ii)(I) of the Act 

specifies that a new medical service or 

technology may be considered for new 

technology add-on payment if, ‘‘based 

on the estimated costs incurred with 

respect to discharges involving such 

service or technology, the DRG 

prospective payment rate otherwise 

applicable to such discharges under this 

subsection is inadequate.’’ We note that 

beginning with discharges occurring in 

FY 2008, CMS transitioned from CMS– 

DRGs to MS–DRGs. 

The regulations at 42 CFR 412.87 

implement these provisions and specify 

three criteria for a new medical service 

or technology to receive the additional 

payment: (1) The medical service or 

technology must be new; (2) the medical 

service or technology must be costly 

such that the DRG rate otherwise 

applicable to discharges involving the 

medical service or technology is 

determined to be inadequate; and (3) the 

service or technology must demonstrate 

a substantial clinical improvement over 

existing services or technologies. Below 

we highlight some of the major statutory 

and regulatory provisions relevant to the 

new technology add-on payment criteria 

as well as other information. For a 

complete discussion on the new 

technology add-on payment criteria, we 

refer readers to the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51572 through 

51574). 

Under the first criterion, as reflected 

in § 412.87(b)(2), a specific medical 

service or technology will be considered 

‘‘new’’ for purposes of new medical 

service or technology add-on payments 

until such time as Medicare data are 

available to fully reflect the cost of the 

technology in the MS–DRG weights 

through recalibration. We note that we 

do not consider a service or technology 

to be new if it is substantially similar to 

one or more existing technologies. That 

is, even if a technology receives a new 

FDA approval, it may not necessarily be 

considered ‘‘new’’ for purposes of new 

technology add-on payments if it is 

‘‘substantially similar’’ to a technology 

that was approved by FDA and has been 

on the market for more than 2 to 3 years. 

In the FY 2006 IPPS final rule (70 FR 

47351) and the FY 2010 IPPS/RY 2010 

LTCH PPS final rule (74 FR 43813 and 

43814), we explained our policy 


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regarding substantial similarity in 

detail. 

Under the second criterion, 

§ 412.87(b)(3) further provides that, to 

be eligible for the add-on payment for 

new medical services or technologies, 

the MS–DRG prospective payment rate 

otherwise applicable to the discharge 

involving the new medical services or 

technologies must be assessed for 

adequacy. Under the cost criterion, to 

assess the adequacy of payment for a 

new technology paid under the 

applicable MS–DRG prospective 

payment rate, we evaluate whether the 

charges for cases involving the new 

technology exceed certain threshold 

amounts. Table 10 that was released 

with the FY 2015 IPPS/LTCH PPS final 

rule contains the final thresholds that 

we use to evaluate applications for new 

technology add-on payments for FY 

2016. We refer readers to the CMS Web 

site at: http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/FY2015-IPPS-FinalRule-Home-Page-Items/FY2015-FinalRule-Tables.html to download and view 

Table 10. We note that later in this 

section under the discussion of the 

WATCHMAN® Left Atrial Appendage 

(LAA) Closure technology, we are 

soliciting public comments on the use of 

supplemental threshold values when 

the coding to identify a new technology 

is reassigned to a new MS–DRG that 

does not have a threshold value 

displayed in the most recent version of 

Table 10. 

In the September 7, 2001 final rule 

that established the new technology 

add-on payment regulations (66 FR 

46917), we discussed the issue of 

whether the Health Insurance 

Portability and Accountability Act 

(HIPAA) Privacy Rule at 45 CFR parts 

160 and 164 applies to claims 

information that providers submit with 

applications for new technology add-on 

payments. We refer readers to the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51573) for complete information on this 

issue. 

Under the third criterion, 

§ 412.87(b)(1) of our existing regulations 

provides that a new technology is an 

appropriate candidate for an additional 

payment when it represents ‘‘an 

advance that substantially improves, 

relative to technologies previously 

available, the diagnosis or treatment of 

Medicare beneficiaries.’’ For example, a 

new technology represents a substantial 

clinical improvement when it reduces 

mortality, decreases the number of 

hospitalizations or physician visits, or 

reduces recovery time compared to the 

technologies previously available. (We 

refer readers to the September 7, 2001 

final rule for a more detailed discussion 

of this criterion (66 FR 46902).) 

The new medical service or 

technology add-on payment policy 

under the IPPS provides additional 

payments for cases with relatively high 

costs involving eligible new medical 

services or technologies while 

preserving some of the incentives 

inherent under an average-based 

prospective payment system. The 

payment mechanism is based on the 

cost to hospitals for the new medical 

service or technology. Under § 412.88, if 

the costs of the discharge (determined 

by applying cost-to-charge ratios (CCRs) 

as described in § 412.84(h)) exceed the 

full DRG payment (including payments 

for IME and DSH, but excluding outlier 

payments), Medicare will make an addon payment equal to the lesser of: (1) 50 

percent of the estimated costs of the 

new technology (if the estimated costs 

for the case including the new 

technology exceed Medicare’s payment); 

or (2) 50 percent of the difference 

between the full DRG payment and the 

hospital’s estimated cost for the case. 

Unless the discharge qualifies for an 

outlier payment, the additional 

Medicare payment is limited to the full 

MS–DRG payment plus 50 percent of 

the estimated costs of the new 

technology. 

Section 503(d)(2) of Public Law 108– 

173 provides that there shall be no 

reduction or adjustment in aggregate 

payments under the IPPS due to add-on 

payments for new medical services and 

technologies. Therefore, in accordance 

with section 503(d)(2) of Public Law 

108–173, add-on payments for new 

medical services or technologies for FY 

2005 and later years have not been 

subjected to budget neutrality. 

In the FY 2009 IPPS final rule (73 FR 

48561 through 48563), we modified our 

regulations at § 412.87 to codify our 

longstanding practice of how CMS 

evaluates the eligibility criteria for new 

medical service or technology add-on 

payment applications. That is, we first 

determine whether a medical service or 

technology meets the newness criterion, 

and only if so, do we then make a 

determination as to whether the 

technology meets the cost threshold and 

represents a substantial clinical 

improvement over existing medical 

services or technologies. We also 

amended § 412.87(c) to specify that all 

applicants for new technology add-on 

payments must have FDA approval or 

clearance for their new medical service 

or technology by July 1 of each year 

prior to the beginning of the fiscal year 

that the application is being considered. 

The Council on Technology and 

Innovation (CTI) at CMS oversees the 

agency’s cross-cutting priority on 

coordinating coverage, coding and 

payment processes for Medicare with 

respect to new technologies and 

procedures, including new drug 

therapies, as well as promoting the 

exchange of information on new 

technologies between CMS and other 

entities. The CTI, composed of senior 

CMS staff and clinicians, was 

established under section 942(a) of 

Public Law 108–173. The Council is cochaired by the Director of the Center for 

Clinical Standards and Quality (CCSQ) 

and the Director of the Center for 

Medicare (CM), who is also designated 

as the CTI’s Executive Coordinator. 

The specific processes for coverage, 

coding, and payment are implemented 

by CM, CCSQ, and the local claimspayment contractors (in the case of local 

coverage and payment decisions). The 

CTI supplements, rather than replaces, 

these processes by working to assure 

that all of these activities reflect the 

agency-wide priority to promote highquality, innovative care. At the same 

time, the CTI also works to streamline, 

accelerate, and improve coordination of 

these processes to ensure that they 

remain up to date as new issues arise. 

To achieve its goals, the CTI works to 

streamline and create a more 

transparent coding and payment 

process, improve the quality of medical 

decisions, and speed patient access to 

effective new treatments. It is also 

dedicated to supporting better decisions 

by patients and doctors in using 

Medicare-covered services through the 

promotion of better evidence 

development, which is critical for 

improving the quality of care for 

Medicare beneficiaries. 

To improve the understanding of 

CMS’ processes for coverage, coding, 

and payment and how to access them, 

the CTI has developed an ‘‘Innovator’s 

Guide’’ to these processes. The intent is 

to consolidate this information, much of 

which is already available in a variety 

of CMS documents and in various 

places on the CMS Web site, in a userfriendly format. This guide was 

published in 2010 and is available on 

the CMS Web site at: http://

www.cms.gov/CouncilonTechInnov/

Downloads/InnovatorsGuide5_10_

10.pdf. 

As we indicated in the FY 2009 IPPS 

final rule (73 FR 48554), we invite any 

product developers or manufacturers of 

new medical technologies to contact the 

agency early in the process of product 

development if they have questions or 

concerns about the evidence that would 

be needed later in the development 

process for the agency’s coverage 

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The CTI aims to provide useful 

information on its activities and 

initiatives to stakeholders, including 

Medicare beneficiaries, advocates, 

medical product manufacturers, 

providers, and health policy experts. 

Stakeholders with further questions 

about Medicare’s coverage, coding, and 

payment processes, or who want further 

guidance about how they can navigate 

these processes, can contact the CTI at 

CTI@cms.hhs.gov. 

We note that applicants for add-on 

payments for new medical services or 

technologies for FY 2017 must submit a 

formal request, including a full 

description of the clinical applications 

of the medical service or technology and 

the results of any clinical evaluations 

demonstrating that the new medical 

service or technology represents a 

substantial clinical improvement, along 

with a significant sample of data to 

demonstrate that the medical service or 

technology meets the high-cost 

threshold. Complete application 

information, along with final deadlines 

for submitting a full application, will be 

posted as it becomes available on the 

CMS Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/

newtech.html. To allow interested 

parties to identify the new medical 

services or technologies under review 

before the publication of the proposed 

rule for FY 2017, the CMS Web site also 

will post the tracking forms completed 

by each applicant. 

2. Public Input Before Publication of a 

Notice of Proposed Rulemaking on AddOn Payments 

Section 1886(d)(5)(K)(viii) of the Act, 

as amended by section 503(b)(2) of 

Public Law 108–173, provides for a 

mechanism for public input before 

publication of a notice of proposed 

rulemaking regarding whether a medical 

service or technology represents a 

substantial clinical improvement or 

advancement. The process for 

evaluating new medical service and 

technology applications requires the 

Secretary to— 

• Provide, before publication of a 

proposed rule, for public input 

regarding whether a new service or 

technology represents an advance in 

medical technology that substantially 

improves the diagnosis or treatment of 

Medicare beneficiaries; 

• Make public and periodically 

update a list of the services and 

technologies for which applications for 

add-on payments are pending; 

• Accept comments, 

recommendations, and data from the 

public regarding whether a service or 

technology represents a substantial 

clinical improvement; and 

• Provide, before publication of a 

proposed rule, for a meeting at which 

organizations representing hospitals, 

physicians, manufacturers, and any 

other interested party may present 

comments, recommendations, and data 

regarding whether a new medical 

service or technology represents a 

substantial clinical improvement to the 

clinical staff of CMS. 

In order to provide an opportunity for 

public input regarding add-on payments 

for new medical services and 

technologies for FY 2016 prior to 

publication of the FY 2016 IPPS/LTCH 

PPS proposed rule, we published a 

notice in the Federal Register on 

November 21, 2014 (79 FR 69490), and 

held a town hall meeting at the CMS 

Headquarters Office in Baltimore, MD, 

on February 3, 2015. In the 

announcement notice for the meeting, 

we stated that the opinions and 

alternatives provided during the 

meeting would assist us in our 

evaluations of applications by allowing 

public discussion of the substantial 

clinical improvement criterion for each 

of the FY 2016 new medical service and 

technology add-on payment 

applications before the publication of 

the FY 2016 IPPS/LTCH PPS proposed 

rule. 

Approximately 95 individuals 

registered to attend the town hall 

meeting in person, while additional 

individuals listened over an open 

telephone line. We also live-streamed 

the town hall meeting and posted the 

town hall on the CMS YouTube Web 

page at: https://www.youtube.com/

watch?v=dn-R5KGQu-M. We considered 

each applicant’s presentation made at 

the town hall meeting, as well as written 

comments submitted on the 

applications that were received by the 

due date of January 19, 2015, in our 

evaluation of the new technology addon payment applications for FY 2016 in 

this proposed rule. 

In response to the published notice 

and the New Technology Town Hall 

meeting, we received written comments 

regarding the applications for FY 2016 

new technology add-on payments. We 

summarize these comments in the 

preamble of this proposed rule or, if 

applicable, indicate that there were no 

comments received, at the end of each 

discussion of the individual 

applications in this proposed rule. 

One commenter provided comments 

that were unrelated to the ‘‘substantial 

clinical improvement’’ criterion. As 

explained above and in the Federal 

Register notice announcing the New 

Technology Town Hall meeting (79 FR 

69490 through 69492), the purpose of 

the meeting was specifically to discuss 

the substantial clinical improvement 

criterion in regard to pending new 

technology add-on payment 

applications for FY 2016. Therefore, we 

are not summarizing the commenter’s 

comments in this proposed rule. The 

commenter is welcome to resubmit its 

comments in response to proposals 

presented in this proposed rule. 

Comment: One commenter stated that 

antibiotics are unique because their 

development and use present many 

challenges that are not applicable to 

other drugs or devices seeking approval 

for new technology add-on payments. 

The commenter urged CMS to utilize 

the expertise of the infectious diseases 

community when determining how to 

evaluate applications for new antibiotics 

for new technology add-on payments. 

The commenter further stated that 

because superiority studies cannot be 

conducted for most serious infections, 

the most appropriate evaluation of 

superiority for many new antibiotics is 

a ‘‘noninferiority’’ clinical trial, which 

is designed to determine if the 

experimental drug is similar in efficacy 

to a standard drug currently available on 

the market. The commenter noted that, 

recently, the FDA has demonstrated 

increased willingness to consider 

approving new antibiotics if efficacy can 

be proven based on achieved, welldefined, and statistically validated 

noninferiority margins. The commenter 

encouraged CMS to consider the proven 

efficacy of these antibiotics based on 

these criteria when determining 

whether to approve a new antibiotic for 

new technology add-on payment. The 

commenter also urged CMS to consider 

carefully analyzed and peer-reviewed 

safety, utilization, and economics data 

when such data are available to support 

the approval of a new antibiotic for new 

technology add-on payment. The 

commenter believed that these 

considerations could increase the types 

of information that would be used to 

support the approval of new drugs for 

which superiority trials are 

inappropriate or not feasible or both. 

The commenter also believed it is 

critical that CMS maintain an ongoing 

dialogue with the FDA as well as 

nongovernment experts in antibiotic 

resistance and antibiotic drug 

development in order to more fully 

understand the highly complex and 

unique issues regarding the type of data 

available for the study and approval of 

new antibiotics. 

Response: In our evaluation of new 

technology applications, we rely on the 

recommendations of our clinical 

advisors. We also consider all clinical 


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data provided by the applicant in our 

determination of whether a technology 

is eligible for new technology add-on 

payments. In addition, we summarize 

each application and invite the public to 

provide their comments and expertise 

on any new technology application 

under consideration during the 

comment period for the proposed rule. 

We also work with the FDA in instances 

where guidance is necessary to 

understand the complexities of a new 

technology. We appreciate the 

commenter’s input, and we will further 

consider these comments in future 

rulemakings. 

We note that the commenter provided 

comments that were unrelated to the 

substantial clinical improvement 

criterion. As noted above, the purpose 

of the new technology town hall 

meeting was specifically to discuss the 

substantial clinical improvement 

criterion in regard to pending new 

technology add-on payment 

applications for FY 2016. Therefore, we 

are not summarizing these comments in 

this proposed rule. The commenter is 

welcome to resubmit its comments in 

response to proposals presented in this 

proposed rule. 

3. Implementation of ICD–10–PCS 

Section ‘‘X’’ Codes for Certain New 

Medical Services and Technologies for 

FY 2016 

As discussed in section II.G.1.a. of the 

preamble of this proposed rule, health 

plans and providers are required, as of 

October 1, 2015, to use the ICD–10 

coding system (ICD–10–PCS codes for 

procedures and ICD–10–CM codes for 

diagnosis), instead of the ICD–9–CM 

coding system, to report diagnoses and 

procedures for Medicare hospital 

inpatient services provided to Medicare 

beneficiaries as classified under the 

MS–DRG system and paid for under the 

IPPS. HIPAA covered entities will 

continue to use ICD–9–CM coding 

practices and principles through 

September 30, 2015. We refer readers to 

section II.G.1.a. of the preamble of this 

proposed rule for a complete discussion 

of the adoption of the ICD–10 coding 

system. 

As part of the transition to the ICD– 

10–CM/PCS coding system, at the 

September 23–24, 2014 ICD–10 

Coordination and Maintenance 

Committee meeting, CMS received a 

request to create a new section within 

the ICD–10–PCS to capture new medical 

services and technologies that might not 

appropriately align with the current 

structure of the ICD–10–PCS codes. 

Examples of these types of new medical 

services and technologies included 

drugs, biologicals, and newer medical 

devices being tested in clinical trials 

that are not currently captured within 

the ICD–9–CM or the ICD–10–PCS. The 

requestor indicated that there may be a 

need to identify and report these 

technologies and inpatient services for 

purposes of approving new technology 

add-on payment applications and 

initiating subsequent new technology 

add-on payments based on approval or 

tracking and analyzing the use of these 

new technologies and services. 

Although several commenters have 

opposed including these types of 

technologies and services within the 

current structure of the ICD–10–PCS 

codes during past ICD–10 Coordination 

and Maintenance Committee meetings, 

as well as in public comments, CMS has 

evaluated these suggestions and 

considered them to be valid. As a result, 

CMS has created a new component 

within the ICD–10–PCS codes, labeled 

Section ‘‘X’’ codes, to identify and 

describe these new technologies and 

services. The new Section ‘‘X’’ codes 

identify new medical services and 

technologies that are not usually 

captured by coders, or that do not 

usually have the desired specificity 

within the current ICD–10–PCS 

structure required to capture the use of 

these new services and technologies. As 

mentioned earlier, examples of these 

types of services and technologies 

include specific drugs, biologicals, and 

newer medical devices being tested in 

clinical trials. The new Section ‘‘X’’ 

codes within the ICD–10–PCS structure 

will be implemented on October 1, 

2015, and will be used to identify new 

technologies and medical services 

approved under the new technology 

add-on payment policy for payment 

purposes beginning October 1, 2015. An 

overview of Section ‘‘X’’ codes was 

provided at the March 18–19, 2015 ICD– 

10 Coordination and Maintenance 

Committee meeting. Further information 

regarding the new Section ‘‘X’’ codes 

and their use within the ICD–10–PCS 

can be found on the CMS Web site at: 

http://www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html 

through the ‘‘CMS Coordination and 

Maintenance Committee Meeting’’ link. 

The ICD–10–PCS includes a new 

section containing the new Section ‘‘X’’ 

codes, which will be used beginning FY 

2016. Decisions regarding changes to 

ICD–10–PCS Section ‘‘X’’ codes will be 

handled in the same manner as the 

decisions for all of the other ICD–10– 

PCS code changes. That is, proposals to 

create, delete, or revise Section ‘‘X’’ 

codes under the ICD–10–PCS structure 

will be referred to the ICD–10 

Coordination and Maintenance 

Committee. In addition, several of the 

new medical services and technologies 

that have been, or may be, approved for 

new technology add-on payments may 

now, and in the future, be assigned a 

Section ‘‘X’’ code within the structure of 

the ICD–10–PCS. The FY 2016 ICD–10– 

PCS Section ‘‘X’’ codes will be posted 

in June 2015 on the Internet via the 

CMS Web site at: http://www.cms.gov/

Medicare/Coding/ICD10/index.html 

under the links on the left side of the 

Web page. 

4. Proposed FY 2016 Status of 

Technologies Approved for FY 2015 

Add-On Payments 

a. Glucarpidase (Voraxaze®) 

BTG International, Inc. submitted an 

application for new technology add-on 

payments for Glucarpidase (Voraxaze®) 

for FY 2013. Glucarpidase is used in the 

treatment of patients who have been 

diagnosed with toxic methotrexate 

(MTX) concentrations as of result of 

renal impairment. The administration of 

Glucarpidase causes a rapid and 

sustained reduction of toxic MTX 

concentrations. 

Voraxaze® was approved by the FDA 

on January 17, 2012. Beginning in 1993, 

certain patients could obtain expanded 

access for treatment use to Voraxaze® as 

an investigational drug. Since 2007, the 

applicant has been authorized to recover 

the costs of making Voraxaze® available 

through its expanded access program. 

We describe expanded access for 

treatment use of investigational drugs 

and authorization to recover certain 

costs of investigational drugs in the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53346 through 53350). Voraxaze® was 

available on the market in the United 

States as a commercial product to the 

larger population as of April 30, 2012. 

In the FY 2013 IPPS/LTCH PPS 

proposed rule (77 FR 27936 through 

27939), we expressed concerns about 

whether Voraxaze® could be considered 

new for FY 2013. After consideration of 

all of the public comments received, in 

the FY 2013 IPPS/LTCH PPS final rule, 

we stated that we considered Voraxaze®

to be ‘‘new’’ as of April 30, 2012, which 

is the date of market availability. 

After evaluation of the newness, costs, 

and substantial clinical improvement 

criteria for new technology payments for 

Voraxaze® and consideration of the 

public comments we received in 

response to the FY 2013 IPPS/LTCH 

PPS proposed rule, we approved 

Voraxaze® for new technology add-on 

payments for FY 2013. Cases of 

Voraxaze® are identified with ICD–9– 

CM procedure code 00.95 (Injection or 


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infusion of glucarpidase). As stated in 

the FY 2015 IPPS/LTCH PPS final rule 

correction notice (79 FR 59679), the cost 

of Voraxaze® is $23,625 per vial. The 

applicant stated that an average of four 

vials is used per Medicare beneficiary. 

Therefore, the average cost per case for 

Voraxaze® is $94,500 ($23,625 × 4). 

Under § 412.88(a)(2), new technology 

add-on payments are limited to the 

lesser of 50 percent of the average cost 

of the technology or 50 percent of the 

costs in excess of the MS–DRG payment 

for the case. As a result, the maximum 

new technology add-on payment for 

Voraxaze® is $47,250 per case. 

As stated above, the new technology 

add-on payment regulations provide 

that ‘‘a medical service or technology 

may be considered new within 2 or 3 

years after the point at which data begin 

to become available reflecting the ICD– 

9–CM code assigned to the new service 

or technology’’ (§ 412.87(b)(2)). Our 

practice has been to begin and end new 

technology add-on payments on the 

basis of a fiscal year, and we have 

generally followed a guideline that uses 

a 6-month window before and after the 

start of the fiscal year to determine 

whether to extend the new technology 

add-on payment for an additional fiscal 

year. In general, we extend add-on 

payments for an additional year only if 

the 3-year anniversary date of the 

product’s entry on the market occurs in 

the latter half of the fiscal year (70 FR 

47362). 

With regard to the newness criterion 

for Voraxaze®, we considered the 

beginning of the newness period to 

commence when Voraxaze® was first 

made available on the U.S. market on 

April 30, 2012. Because the 3-year 

anniversary date for Voraxaze® occurred 

in the latter half of FY 2015 (April 30, 

2015), in the FY 2015 IPPS/LTCH PPS 

final rule, we continued new technology 

add-on payments for this technology for 

FY 2015 (79 FR 49918). However, for FY 

2016, the 3-year anniversary date of the 

product’s entry on the U.S. market 

(April 30, 2015) occurs prior to the 

beginning of FY 2016. Therefore, we are 

proposing to discontinue new 

technology add-on payments for 

Voraxaze® for FY 2016. We are inviting 

public comments on this proposal. 

b. Zenith® Fenestrated Abdominal 

Aortic Aneurysm (AAA) Endovascular 

Graft 

Cook® Medical submitted an 

application for new technology add-on 

payments for the Zenith® Fenestrated 

Abdominal Aortic Aneurysm (AAA) 

Endovascular Graft (Zenith® F. Graft) for 

FY 2013. The applicant stated that the 

current treatment for patients who have 

had an AAA is an endovascular graft. 

The applicant explained that the 

Zenith® F. Graft is an implantable 

device designed to treat patients who 

have an AAA and who are anatomically 

unsuitable for treatment with currently 

approved AAA endovascular grafts 

because of the length of the infrarenal 

aortic neck. The applicant noted that, 

currently, an AAA is treated through an 

open surgical repair or medical 

management for those patients not 

eligible for currently approved AAA 

endovascular grafts. 

With respect to newness, the 

applicant stated that FDA approval for 

the use of the Zenith® F. Graft was 

granted on April 4, 2012. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53360 

through 53365), we stated that because 

the Zenith® F. Graft was approved by 

the FDA on April 4, 2012, we believed 

that the Zenith® F. Graft met the 

newness criterion as of that date. 

After evaluation of the newness, costs, 

and substantial clinical improvement 

criteria for new technology add-on 

payments for the Zenith® F. Graft and 

consideration of the public comments 

we received in response to the FY 2013 

IPPS/LTCH PPS proposed rule, we 

approved the Zenith® F. Graft for new 

technology add-on payments for FY 

2013. Cases involving the Zenith® F. 

Graft that are eligible for new 

technology add-on payments currently 

are identified by ICD–9–CM procedure 

code 39.78 (Endovascular implantation 

of branching or fenestrated graft(s) in 

aorta). In the application, the applicant 

provided a breakdown of the costs of the 

Zenith® F. Graft. The total cost of the 

Zenith® F. Graft utilizing bare metal 

(renal) alignment stents was $17,264. Of 

the $17,264 in costs for the Zenith® F. 

Graft, $921 is for components that are 

used in a standard Zenith AAA 

Endovascular Graft procedure. Because 

the costs for these components are 

already reflected within the MS–DRGs 

(and are no longer ‘‘new’’), in the FY 

2013 IPPS/LTCH PPS final rule, we 

stated that we do not believe it is 

appropriate to include these costs in our 

calculation of the maximum cost to 

determine the maximum add-on 

payment for the Zenith® F. Graft. 

Therefore, the total maximum cost for 

the Zenith® F. Graft is $16,343 

($17,264–$921). Under § 412.88(a)(2), 

new technology add-on payments are 

limited to the lesser of 50 percent of the 

average cost of the device or 50 percent 

of the costs in excess of the MS–DRG 

payment for the case. As a result, the 

maximum add-on payment for a case 

involving the Zenith® F. Graft is 

$8,171.50. 

With regard to the newness criterion 

for the Zenith® F. Graft, we considered 

the beginning of the newness period to 

commence when the Zenith® F. Graft 

was approved by the FDA on April 4, 

2012. Because the 3-year anniversary 

date of the entry of the Zenith® F. Graft 

on the U.S. market occurred in the 

second half of FY 2015 (April 4, 2015), 

in the FY 2015 IPPS/LTCH PPS final 

rule, we continued new technology addon payments for this technology for FY 

2015 (79 FR 49922). However, for FY 

2016, the 3-year anniversary date of the 

product’s entry on the U.S. market 

(April 4, 2015) occurs prior to the 

beginning of FY 2016. Therefore, we are 

proposing to discontinue new 

technology add-on payments for the 

Zenith® F. Graft for FY 2016. We are 

inviting public comments on this 

proposal. 

c. KcentraTM

CSL Behring submitted an application 

for new technology add-on payments for 

KcentraTM for FY 2014. KcentraTM is a 

replacement therapy for fresh frozen 

plasma (FFP) for patients with an 

acquired coagulation factor deficiency 

due to warfarin and who are 

experiencing a severe bleed. KcentraTM

contains the Vitamin K dependent 

coagulation factors II, VII, IX and X, 

together known as the prothrombin 

complex, and antithrombotic proteins C 

and S. Factor IX is the lead factor for the 

potency of the preparation. The product 

is a heat-treated, non-activated, virus 

filtered and lyophilized plasma protein 

concentrate made from pooled human 

plasma. KcentraTM is available as a 

lyophilized powder that needs to be 

reconstituted with sterile water prior to 

administration via intravenous infusion. 

The product is dosed based on Factor IX 

units. Concurrent Vitamin K treatment 

is recommended to maintain blood 

clotting factor levels once the effects of 

KcentraTM have diminished. 

KcentraTM was approved by the FDA 

on April 29, 2013. In the FY 2014 IPPS/ 

LTCH PPS final rule, we finalized new 

ICD–9–CM procedure code 00.96 

(Infusion of 4-Factor Prothrombrin 

Complex Concentrate) which uniquely 

identifies KcentraTM. 

In the FY 2014 IPPS/LTCH PPS 

proposed rule (78 FR 27538), we noted 

that we were concerned that KcentraTM

may be substantially similar to FFP and/ 

or Vitamin K therapy. In the FY 2014 

IPPS/LTCH PPS final rule, in response 

to comments submitted by the 

manufacturer, we stated that we agree 

that KcentraTM may be used in a patient 

population that is experiencing an 

acquired coagulation factor deficiency 

due to Warfarin and who are 


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experiencing a severe bleed currently 

but are ineligible for FFP, particularly 

for use by IgA deficient patients and 

other patient populations that have no 

other treatment option to resolve severe 

bleeding in the context of an acquired 

Vitamin K deficiency. In addition, FFP 

is limited because it requires special 

storage conditions while KcentraTM is 

stable for up to 36 months at room 

temperature thus allowing hospitals that 

otherwise would not have access to FFP 

(for example, small rural hospitals as 

discussed by the applicant in its 

comments) to keep a supply of 

KcentraTM and treat patients who would 

possibly have no access to FFP. We 

noted that FFP is considered perishable 

and can be scarce by nature (due to 

production and other market 

limitations) thus making some hospitals 

unable to store FFP, which limits access 

to certain patient populations in certain 

locations. Therefore, we stated that we 

believe that KcentraTM provides a 

therapeutic option for a new patient 

population and is not substantially 

similar to FFP. Also, we gave credence 

to the information presented by the 

manufacturer that KcentraTM provides a 

simple and rapid repletion relative to 

FFP and reduces the risk of a 

transfusion reaction relative to FFP 

because it does not contain ABO 

antibodies and does not require ABO 

typing. As a result, we concluded that 

KcentraTM is not substantially similar to 

FFP, and that it meets the newness 

criterion. 

After evaluation of the newness, cost, 

and substantial clinical improvement 

criteria for new technology add-on 

payments for KcentraTM and 

consideration of the public comments 

we received in response to the FY 2014 

IPPS/LTCH PPS proposed rule, we 

approved KcentraTM for new technology 

add-on payments for FY 2014 (78 FR 

50575 through 50580). Cases involving 

KcentraTM that are eligible for new 

technology add-on payments currently 

are identified by ICD–9–CM procedure 

code 00.96. In the application, the 

applicant estimated that the average 

Medicare beneficiary would require an 

average dosage of 2500 International 

Units (IU). Vials contain 500 IU at a cost 

of $635 per vial. Therefore, cases of 

KcentraTM would incur an average cost 

per case of $3,175 ($635 × 5). Under 

§ 412.88(a)(2), new technology add-on 

payments are limited to the lesser of 50 

percent of the average cost of the 

technology or 50 percent of the costs in 

excess of the MS–DRG payment for the 

case. As a result, the maximum add-on 

payment for a case of KcentraTM was 

$1,587.50 for FY 2014. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50579), we stated that new 

technology add-on payments for 

KcentraTM would not be available with 

respect to discharges for which the 

hospital received an add-on payment for 

a blood clotting factor administered to a 

Medicare beneficiary with hemophilia 

who is a hospital inpatient. Under 

section 1886(d)(1)(A)(iii) of the Act, the 

national adjusted DRG prospective 

payment rate is ‘‘the amount of the 

payment with respect to the operating 

costs of inpatient hospital services (as 

defined in subsection (a)(4) of this 

section)’’ for discharges on or after April 

1, 1988. Section 1886(a)(4) of the Act 

excludes from the term ‘‘operating costs 

of inpatient hospital services’’ the costs 

with respect to administering blood 

clotting factors to individuals with 

hemophilia. The costs of administering 

a blood clotting factor to a Medicare 

beneficiary who has hemophilia and is 

a hospital inpatient are paid separately 

from the IPPS. (For information on how 

the blood clotting factor add-on 

payment is made, we refer readers to 

Section 20.7.3, Chapter 3, of the 

Medicare Claims Processing Manual, 

which can be downloaded from the 

CMS Web site at: http://cms.gov/

Regulations-and-Guidance/Guidance/

Manuals/Downloads/clm104c03.pdf.) In 

addition, we stated that if KcentraTM is 

approved by the FDA as a blood clotting 

factor, we believed that it may be 

eligible for blood clotting factor add-on 

payments when administered to 

Medicare beneficiaries with hemophilia. 

We make an add-on payment for 

KcentraTM for such discharges in 

accordance with our policy for payment 

of a blood clotting factor, and the costs 

would be excluded from the operating 

costs of inpatient hospital services as set 

forth in section 1886(a)(4) of the Act. 

Section 1886(d)(5)(K)(i) of the Act 

requires the Secretary to ‘‘establish a 

mechanism to recognize the costs of 

new medical services and technologies 

under the payment system established 

under this subsection’’ beginning with 

discharges on or after October 1, 2001. 

We believe that it is reasonable to 

interpret this requirement to mean that 

the payment mechanism established by 

the Secretary recognizes only costs for 

those items that would otherwise be 

paid based on the prospective payment 

system (that is, ‘‘the payment system 

established under this subsection’’). As 

noted above, under section 

1886(d)(1)(A)(iii) of the Act, the national 

adjusted DRG prospective payment rate 

is the amount of payment for the 

operating costs of inpatient hospital 

services, as defined in section 1886(a)(4) 

of the Act, for discharges on or after 

April 1, 1988. We understand this to 

mean that a new medical service or 

technology must be an operating cost of 

inpatient hospital services paid based 

on the prospective payment system, and 

not excluded from such costs, in order 

to be eligible for the new technology 

add-on payment. We pointed out that 

new technology add-on payments are 

based on the operating costs per case 

relative to the prospective payment rate 

as described in § 412.88. Therefore, we 

believe that new technology add-on 

payments are appropriate only when the 

new technology is an operating cost of 

inpatient hospital services and are not 

appropriate when the new technology is 

excluded from such costs. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50579), we stated that we 

believe that hospitals may only receive 

new technology add-on payments for 

discharges where KcentraTM is an 

operating cost of inpatient hospital 

services. In other words, a hospital 

would not be eligible to receive the new 

technology add-on payment when it is 

administering KcentraTM in treating a 

Medicare beneficiary who has 

hemophilia. In those instances, 

KcentraTM is specifically excluded from 

the operating costs of inpatient hospital 

services in accordance with section 

1886(a)(4) of the Act and paid separately 

from the IPPS. However, when a 

hospital administers KcentraTM to a 

Medicare beneficiary who does not have 

hemophilia, the hospital would be 

eligible for a new technology add-on 

payment because KcentraTM would not 

be excluded from the operating costs of 

inpatient hospital services. Therefore, 

discharges where the hospital receives a 

blood clotting factor add-on payment 

are not eligible for a new technology 

add-on payment for the blood clotting 

factor. We refer readers to Section 

20.7.3, Chapter 3, of the Medicare 

Claims Processing Manual for a 

complete discussion on when a blood 

clotting factor add-on payment is made. 

The manual can be downloaded from 

the CMS Web site at: http://

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/

Downloads/clm104c03.pdf. 

With regard to the newness criterion 

for KcentraTM, we considered the 

beginning of the newness period to 

commence when KcentraTM was 

approved by the FDA on April 29, 2013. 

Because the 3-year anniversary date of 

the entry of KcentraTM on the U.S. 

market will occur in the second half of 

FY 2016 (April 29, 2016), we are 

proposing to continue new technology 

add-on payments for this technology for 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24424 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

FY 2016. We are inviting public 

comments on this proposal. 

Because we are adopting the ICD–10 

coding system, effective October 1, 

2015, as discussed in section II.G.1.a. of 

the preamble of this proposed rule, for 

FY 2016, we are proposing to identify 

and make new technology add-on 

payments for cases involving the 

KcentraTM technology with ICD–10–PCS 

procedure code 30283B1 (Transfusion of 

nonautologous 4-factor prothrombin 

complex concentrate into vein, 

percutaneous approach). As stated 

above, new technology add-on 

payments for KcentraTM would not be 

available with respect to discharges for 

which the hospital received an add-on 

payment for a blood clotting factor 

administered to a Medicare beneficiary 

with hemophilia who is a hospital 

inpatient. For information on how the 

blood clotting factor add-on payment is 

made (including a list of ICD–10 

diagnosis codes that would negate the 

eligibility of a case for new technology 

add-on payments, if reported in 

combination with the proposed ICD–10 

procedure code used to identify cases 

involving the KcentraTM technology), we 

refer readers to Section 20.7.3, Chapter 

3, of the Medicare Claims Processing 

Manual, which can be downloaded from 

the CMS Web site at: http://cms.gov/

Regulations-and-Guidance/Guidance/

Manuals/Downloads/clm104c03.pdf. 

The maximum new technology add-on 

payment for a case involving the 

KcentraTM technology would remain at 

$1,587.50 for FY 2016. We are inviting 

public comments on this proposal. 

d. Argus® II Retinal Prosthesis System 

Second Sight Medical Products, Inc. 

submitted an application for new 

technology add-on payments for the 

Argus® II Retinal Prosthesis System 

(Argus® II System) for FY 2014. The 

Argus® II System is an active 

implantable medical device that is 

intended to provide electrical 

stimulation of the retina to induce 

visual perception in patients who are 

profoundly blind due to retinitis 

pigmentosa (RP). These patients have 

bare or no light perception in both eyes. 

The system employs electrical signals to 

bypass dead photo-receptor cells and 

stimulate the overlying neurons 

according to a real-time video signal 

that is wirelessly transmitted from an 

externally worn video camera. The 

Argus® II implant is intended to be 

implanted in a single eye, typically the 

worse-seeing eye. Currently, bilateral 

implants are not intended for this 

technology. According to the applicant, 

the surgical implant procedure takes 

approximately 4 hours and is performed 

under general anesthesia. 

The Argus® II System consists of three 

primary components: (1) An implant 

which is an epiretinal prosthesis that is 

fully implanted on and in the eye (that 

is, there are no percutaneous leads); (2) 

external components worn by the user; 

and (3) a ‘‘fitting’’ system for the 

clinician that is periodically used to 

perform diagnostic tests with the system 

and to custom-program the external unit 

for use by the patient. We describe these 

components more fully below. 

• Implant: The retinal prosthesis 

implant is responsible for receiving 

information from the external 

components of the system and 

electrically stimulating the retina to 

induce visual perception. The retinal 

implant consists of: (a) A receiving coil 

for receiving information and power 

from the external components of the 

Argus® II System; (b) electronics to 

drive stimulation of the electrodes; and 

(c) an electrode array. The receiving coil 

and electronics are secured to the 

outside of the eye using a standard 

scleral band and sutures, while the 

electrode array is secured to the surface 

of the retina inside the eye by a retinal 

tack. A cable, which passes through the 

eye wall, connects the electronics to the 

electrode array. A pericardial graft is 

placed over the extra-ocular portion on 

the outside of the eye. 

• External Components: The implant 

receives power and data commands 

wirelessly from an external unit of 

components, which include the Argus II 

Glasses and Video Processing Unit 

(VPU). A small lightweight video 

camera and transmitting coil are 

mounted on the glasses. The telemetry 

coils and radio-frequency system are 

mounted on the temple arm of the 

glasses for transmitting data from the 

VPU to the implant. The glasses are 

connected to the VPU by a cable. This 

VPU is worn by the patient, typically on 

a belt or a strap, and is used to process 

the images from the video camera and 

convert the images into electrical 

stimulation commands, which are 

transmitted wirelessly to the implant. 

• ‘‘Fitting System’’: To be able to use 

the Argus® II System, a patient’s VPU 

needs to be custom-programmed. This 

process, which the applicant called 

‘‘fitting’’, occurs in the hospital/clinic 

shortly after the implant surgery and 

then periodically thereafter as needed. 

The clinician/physician also uses the 

‘‘Fitting System’’ to run diagnostic tests 

(for example, to obtain electrode and 

impedance waveform measurements or 

to check the radio-frequency link 

between the implant and external unit). 

This ‘‘Fitting System’’ can also be 

connected to a ‘‘Psychophysical Test 

System’’ to evaluate patients’ 

performance with the Argus® II System 

on an ongoing basis. 

These three components work 

together to stimulate the retina and 

allow a patient to perceive phosphenes 

(spots of light), which they then need to 

learn to interpret. While using the 

Argus® II System, the video camera on 

the patient-worn glasses captures a 

video image. The video camera signal is 

sent to the VPU, which processes the 

video camera image and transforms it 

into electrical stimulation patterns. The 

electrical stimulation data are then sent 

to a transmitter coil mounted on the 

glasses. The transmitter coil sends both 

data and power via radio-frequency (RF) 

telemetry to the implanted retinal 

prosthesis. The implant receives the RF 

commands and delivers stimulation to 

the retina via an array of electrodes that 

is secured to the retina with a retinal 

tack. 

In patients with RP, the photoreceptor 

cells in the retina, which normally 

transduce incoming light into an 

electro-chemical signal, have lost most 

of their function. The stimulation pulses 

delivered to the retina via the electrode 

array of the Argus® II System are 

intended to mimic the function of these 

degenerated photoreceptors cells. These 

pulses induce cellular responses in the 

remaining, viable retinal nerve cells that 

travel through the optic nerve to the 

visual cortex where they are perceived 

as phosphenes (spots of light). Patients 

learn to interpret the visual patterns 

produced by these phosphenes. 

With respect to the newness criterion, 

according to the applicant, the FDA 

designated the Argus® II System a 

Humanitarian Use Device in May 2009 

(HUD designation #09–0216). The 

applicant submitted a Humanitarian 

Device Exemption (HDE) application 

(#H110002) to the FDA in May 2011 to 

obtain market approval for the Argus® II 

System. The HDE was referred to the 

Ophthalmic Devices Panel of the FDA’s 

Medical Devices Advisory Committee 

for review and recommendation. At the 

Panel’s meeting held on September 28, 

2012, the Panel voted 19 to 0 that the 

probable benefits of the Argus® II 

System outweigh the risks of the system 

for the proposed indication for use. The 

applicant received the HDE approval 

from the FDA on February 14, 2013. 

However, in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 49924 through 

49925), we discussed comments we had 

received informing CMS that the Argus®

II System was not available on the U.S. 

market until December 20, 2013. The 

applicant explained that, as part of the 

lengthy approval process, it was 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24425 

required to submit a request to the 

Federal Communications Commission 

(FCC) for a waiver of section 15.209(a) 

of the FCC rules that would allow the 

applicant to apply for FCC authorization 

to utilize this specific RF band. The FCC 

approved the applicant’s waiver request 

on November 30, 2011. After receiving 

the FCC waiver of the section 15.209(a) 

rules, the applicant requested and 

obtained a required Grant of Equipment 

Authorization to utilize the specific RF 

band, which the FCC issued on 

December 20, 2013. Therefore, the 

applicant stated that the date the Argus®

II System first became available for 

commercial sale in the United States 

was December 20, 2013. We agreed with 

the applicant that, due to the delay, the 

date of newness for the Argus® II 

System was December 20, 2013, instead 

of February 14, 2013. 

Currently there are no other approved 

treatments for patients diagnosed with 

severe to profound RP. The Argus® II 

System has an IDE number of G050001 

and is a Class III device. In the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50580 

through 50583), we finalized new ICD– 

9–CM procedure code 14.81 

(Implantation of epiretinal visual 

prosthesis), which uniquely identifies 

the Argus® II System. The other two 

codes finalized by CMS are for removal, 

revision, or replacement of the device. 

After evaluation of the new 

technology add-on payment application 

and consideration of public comments 

received, we concluded that the Argus®

II System met all of the new technology 

add-on payment policy criteria. 

Therefore, we approved the Argus® II 

System for new technology add-on 

payments in FY 2014 (78 FR 50580 

through 50583). Cases involving the 

Argus® II System that are eligible for 

new technology add-on payments 

currently are identified by ICD–9–CM 

procedure code 14.81. We note that 

section 1886(d)(5)(K)(i) of the Act 

requires that the Secretary establish a 

mechanism to recognize the costs of 

new medical services or technologies 

under the payment system established 

under that subsection, which establishes 

the system for paying for the operating 

costs of inpatient hospital services. The 

system of payment for capital costs is 

established under section 1886(g) of the 

Act, which makes no mention of any 

add-on payments for a new medical 

service or technology. Therefore, it is 

not appropriate to include capital costs 

in the add-on payments for a new 

medical service or technology. In the 

application, the applicant provided a 

breakdown of the costs of the Argus® II 

System. The total operating cost of the 

Argus® II System is $144,057.50. Under 

§ 412.88(a)(2), new technology add-on 

payments are limited to the lesser of 50 

percent of the average cost of the device 

or 50 percent of the costs in excess of 

the MS–DRG payment for the case. As 

a result, the maximum add-on payment 

for a case involving the Argus® II 

System for FY 2014 was $72,028.75. 

With regard to the newness criterion 

for the Argus® II System, we considered 

the beginning of the newness period to 

commence when the Argus® II System 

became available on the U.S. market on 

December 20, 2013. Because the 3-year 

anniversary date of the entry of the 

Argus® II System on the U.S. market 

will occur in the first half of FY 2017 

(December 23, 2016), we are proposing 

to continue new technology add-on 

payments for this technology for FY 

2016. We are inviting public comments 

on this proposal. 

Because we are adopting the ICD–10 

coding system, effective October 1, 

2015, as discussed in section II.G.1.a. of 

the preamble of this proposed rule, for 

FY 2016, we are proposing to identify 

and make new technology add-on 

payments for cases involving the Argus®

II System when one of the following 

ICD–10–PCS procedure codes is 

reported: 08H005Z (Insertion of 

epiretinal visual prosthesis into right 

eye, open approach) or 08H105Z 

(Insertion of epiretinal visual prosthesis 

into left eye, open approach). The 

maximum new technology add-on 

payment for a case involving the Argus®

II System would remain at $72,028.75 

for FY 2016. We are inviting public 

comments on this proposal. 

e. Zilver® PTX® Drug Eluting Peripheral 

Stent 

Cook® Medical submitted an 

application for new technology add-on 

payments for the Zilver® PTX® Drug 

Eluting Peripheral Stent (Zilver® PTX®) 

for FY 2014. The Zilver® PTX® is 

intended for use in the treatment of 

peripheral artery disease (PAD) of the 

above–the-knee femoropopliteal arteries 

(superficial femoral arteries). According 

to the applicant, the stent is 

percutaneously inserted into the 

artery(s), usually by accessing the 

common femoral artery in the groin. The 

applicant stated that an introducer 

catheter is inserted over the wire guide 

and into the target vessel where the 

lesion will first be treated with an 

angioplasty balloon to prepare the 

vessel for stenting. The applicant 

indicated that the stent is selfexpanding, made of nitinol (nickel 

titanium), and is coated with the drug 

Paclitaxel. Paclitaxel is a drug approved 

for use as an anticancer agent and for 

use with coronary stents to reduce the 

risk of renarrowing of the coronary 

arteries after stenting procedures. 

The applicant received FDA approval 

on November 15, 2012, for the Zilver®

PTX®. The applicant maintains that the 

Zilver® PTX® is the first drug-eluting 

stent used for superficial femoral 

arteries. The technology is currently 

described by ICD–9–CM procedure code 

00.60 (Insertion of drug-eluting stent(s) 

of the superficial femoral artery). 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50583 through 50585), after 

evaluation of the new technology addon payment application and 

consideration of the public comments 

received, we approved the Zilver® PTX®

for new technology add-on payments in 

FY 2014. Cases involving the Zilver®

PTX® that are eligible for new 

technology add-on payments are 

identified by ICD–9–CM procedure code 

00.60. As explained in the FY 2014 

IPPS/LTCH PPS final rule, to determine 

the amount of Zilver® PTX® stents per 

case, instead of using the amount of 

stents used per case based on the ICD– 

9–CM codes, the applicant used an 

average of 1.9 stents per case based on 

the Zilver® PTX® Global Registry 

Clinical Study. The applicant stated in 

its application that the anticipated cost 

per stent is approximately $1,795. 

Therefore, cases of the Zilver® PTX®

would incur an average cost per case of 

$3,410.50 ($1,795 × 1.9). Under 

§ 412.88(a)(2), new technology add-on 

payments are limited to the lesser of 50 

percent of the average cost of the device 

or 50 percent of the costs in excess of 

the MS–DRG payment for the case. As 

a result, the maximum add-on payment 

for a case of the Zilver® PTX® was 

$1,705.25 for FY 2014. 

With regard to the newness criterion 

for the Zilver® PTX®, we considered the 

beginning of the newness period to 

commence when the Zilver® PTX® was 

approved by the FDA on November 15, 

2012. Because the 3-year anniversary 

date of the entry of the Zilver® PTX® on 

the U.S. market occurred after FY 2015 

(November 15, 2015), in the FY 2015 

IPPS/LTCH PPS final rule, we 

continued new technology add-on 

payments for this technology for FY 

2015 (79 FR 49925). However, for FY 

2016, the 3-year anniversary date of the 

product’s entry on the U.S. market 

(November 15, 2015) occurs in the first 

half of FY 2016. Therefore, we are 

proposing to discontinue new 

technology add-on payments for the 

Zilver® PTX® for FY 2016. We are 

inviting public comments on this 

proposal. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24426 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

f. CardioMEMSTM HF (Heart Failure) 

Monitoring System 

CardioMEMS, Inc. submitted an 

application for new technology add-on 

payment for FY 2015 for the 

CardioMEMSTM HF (Heart Failure) 

Monitoring System, which is an 

implantable hemodynamic monitoring 

system comprised of an implantable 

sensor/monitor placed in the distal 

pulmonary artery. Pulmonary artery 

hemodynamic monitoring is used in the 

management of heart failure. The 

CardioMEMSTM HF Monitoring System 

measures multiple pulmonary artery 

pressure parameters for an ambulatory 

patient to measure and transmit data via 

a wireless sensor to a secure Web site. 

The CardioMEMSTM HF Monitoring 

System utilizes radiofrequency (RF) 

energy to power the sensor and to 

measure pulmonary artery (PA) pressure 

and consists of three components: An 

Implantable Sensor with Delivery 

Catheter, an External Electronics Unit, 

and a Pulmonary Artery Pressure 

Database. The system provides the 

physician with the patient’s PA pressure 

waveform (including systolic, diastolic, 

and mean pressures) as well as heart 

rate. The sensor is permanently 

implanted in the distal pulmonary 

artery using transcatheter techniques in 

the catheterization laboratory where it is 

calibrated using a Swan-Ganz catheter. 

PA pressures are transmitted by the 

patient at home in a supine position on 

a padded antenna, pushing one button 

which records an 18-second continuous 

waveform. The data also can be 

recorded from the hospital, physician’s 

office or clinic. 

The hemodynamic data, including a 

detailed waveform, are transmitted to a 

secure Web site that serves as the 

Pulmonary Artery Pressure Database, so 

that information regarding PA pressure 

is available to the physician or nurse at 

any time via the Internet. Interpretation 

of trend data allows the clinician to 

make adjustments to therapy and can be 

used along with heart failure signs and 

symptoms to adjust medications. 

The applicant believed that a large 

majority of patients receiving the sensor 

would be admitted as an inpatient to a 

hospital with a diagnosis of acute or 

chronic heart failure, which is typically 

described by ICD–9–CM diagnosis code 

428.43 (Acute on chronic combined 

systolic and diastolic heart failure) and 

the sensor would be implanted during 

the inpatient stay. The applicant stated 

that for safety considerations, a small 

portion of these patients may be 

discharged and the sensor would be 

implanted at a future date in the 

hospital outpatient setting. In addition, 

there would likely be a group of patients 

diagnosed with chronic heart failure 

who are not currently hospitalized, but 

who have been hospitalized in the past 

few months for which the treating 

physician believes that regular 

pulmonary artery pressure readings are 

necessary to optimize patient 

management. Depending on the 

patient’s status, the applicant stated that 

these patients may have the sensor 

implanted in the hospital inpatient or 

outpatient setting. 

The applicant received FDA approval 

on May 28, 2014. The CardioMEMSTM

HF Monitoring System is currently 

described by ICD–9–CM procedure code 

38.26 (Insertion of implantable pressure 

sensor without lead for intracardiac or 

great vessel hemodynamic monitoring). 

After evaluation of the newness, costs, 

and substantial clinical improvement 

criteria for new technology payments for 

the CardioMEMSTM HF Monitoring 

System and consideration of the public 

comments we received in response to 

the FY 2015 IPPS/LTCH PPS proposed 

rule, we approved the CardioMEMSTM

HF Monitoring System for new 

technology add-on payments for FY 

2015 (79 FR 49940). Cases involving the 

CardioMEMSTM HF Monitoring System 

that are eligible for new technology addon payments are identified by ICD–9– 

CM procedure code 38.26 (Insertion of 

implantable wireless pressure sensor for 

intracardiac or great vessel 

hemodynamic monitoring), which was 

effective October 1, 2011. With the new 

technology add-on payment application, 

the applicant stated that the total 

operating cost of the CardioMEMSTM HF 

Monitoring System is $17,750. Under 

§ 412.88(a)(2), new technology add-on 

payments are limited to the lesser of 50 

percent of the average cost of the device 

or 50 percent of the costs in excess of 

the MS–DRG payment for the case. As 

a result, the maximum new technology 

add-on payment for a case involving the 

CardioMEMSTM HF Monitoring System 

is $8,875. 

With regard to the newness criterion 

for the CardioMEMSTM HF Monitoring 

System, we considered the beginning of 

the newness period to commence when 

the CardioMEMSTM HF Monitoring 

System was approved by the FDA on 

May 28, 2014. Because the 3-year 

anniversary date of the entry of the 

CardioMEMSTM HF Monitoring System 

on the U.S. market will occur in FY 

2017 (May 28, 2017), we are proposing 

to continue new technology add-on 

payments for this technology for FY 

2016. We are inviting public comments 

on this proposal. 

Because we are adopting the ICD–10 

coding system, effective October 1, 

2015, as discussed in section II.G.1.a. of 

the preamble of this proposed rule, for 

FY 2016, we are proposing to identify 

and make new technology add-on 

payments for cases involving the 

CardioMEMSTM HF Monitoring System 

using either ICD–10–PCS procedure 

code 02HQ30Z (Insertion of pressure 

sensor monitoring device into right 

pulmonary artery, percutaneous 

approach) or ICD–10–PCS procedure 

code 02HR30Z (Insertion of pressure 

sensor monitoring device into left 

pulmonary artery, percutaneous 

approach). The maximum payment for a 

case involving the CardioMEMSTM HF 

Monitoring System would remain at 

$8,875 for FY 2016. We are inviting 

public comments on this proposal. 

g. MitraClip® System 

Abbott Vascular submitted an 

application for new technology add-on 

payments for the MitraClip® System for 

FY 2015. The MitraClip® System is a 

transcatheter mitral valve repair system 

that includes a MitraClip® device 

implant, a Steerable Guide Catheter, and 

a Clip Delivery System. It is designed to 

perform reconstruction of the 

insufficient mitral valve for high-risk 

patients who are not candidates for 

conventional open mitral valve repair 

surgery. 

Mitral regurgitation (MR), also 

referred to as mitral insufficiency or 

mitral incompetence, occurs when the 

mitral valve fails to close completely 

causing the blood to leak or flow 

backwards (regurgitate) into the left 

ventricle. If the amount of blood that 

leaks backwards into the left ventricle is 

minimal, then intervention is usually 

not necessary. However, if the amount 

of blood that is regurgitated becomes 

significant, this can cause the left 

ventricle to work harder to meet the 

body’s need for oxygenated blood. 

Severity levels of MR can range from 

grade 1+ through grade 4+. If left 

untreated, severe MR can lead to heart 

failure and death. The American College 

of Cardiology (ACC) and the American 

Heart Association (AHA) issued practice 

guidelines in 2006 that recommended 

intervention for moderate/severe or 

severe MR (grade 3+ to 4+). The 

applicant stated that the MitraClip®

System is ‘‘indicated for percutaneous 

reduction of significant mitral 

regurgitation . . . in patients who have 

been determined to be at prohibitive 

risk for mitral value surgery by a heart 

team, which includes a cardiac surgeon 

experienced in mitral valve surgery and 

a cardiologist experienced in mitral 

valve disease and in whom existing 

comorbidities would not preclude the 


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expected benefit from correction of the 

mitral regurgitation.’’ 

The MitraClip® System mitral valve 

repair procedure is based on the doubleorifice surgical repair technique that has 

been used as a surgical technique in 

open chest, arrested-heart surgery for 

the treatment of MR since the early 

1990s. According to the applicant, in 

utilizing ‘‘the double-orifice technique, 

a portion of the anterior leaflet is 

sutured to the corresponding portion of 

the posterior leaflet using standard 

techniques and forceps and suture, 

creating a point of permanent 

cooptation (‘‘approximation’’) of the two 

leaflets. When the suture is placed in 

the middle of the valve, the valve will 

have a functional double orifice during 

diastole.’’ 

With regard to the newness criterion, 

the MitraClip® System received a 

premarket approval from the FDA on 

October 24, 2013. The MitraClip®

System is indicated ‘‘for the 

percutaneous reduction of significant 

symptomatic mitral regurgitation (MR 

>= 3+) due to primary abnormality of 

the mitral apparatus (degenerative MR) 

in patients who have been determined 

to be at prohibitive risk for mitral valve 

surgery by a heart team, which includes 

a cardiac surgeon experienced in mitral 

valve surgery and a cardiologist 

experienced in mitral valve disease, and 

in whom existing comorbidities would 

not preclude the expected benefit from 

reduction of the mitral regurgitation.’’ 

The MitraClip® System became 

immediately available on the U.S. 

market following FDA approval. The 

MitraClip® System is a Class III device, 

and has an investigational device 

exemption (IDE) for the EVEREST study 

(Endovascular Valve Edge-to-Edge 

Repair Study)—IDE G030061, and for 

the COAPT study (Cardiovascular 

Outcomes Assessment of the MitraClip 

Percutaneous Therapy for Health 

Failure Patients with Functional Mitral 

Regurgitation)—IDE G120024. Effective 

October 1, 2010, ICD–9–CM procedure 

code 35.97 (Percutaneous mitral valve 

repair with implant) was created to 

identify and describe the MitraClip®

System technology. 

On August 7, 2014, CMS issued a 

National Coverage Decision (NCD) 

concerning Transcatheter Mitral Valve 

Repair procedures. We refer readers to 

the CMS Web site at: http://

www.cms.gov/medicare-coveragedatabase/details/nca-trackingsheet.aspx?NCAId=273 for information 

related to this NCD. 

After evaluation of the newness, costs, 

and substantial clinical improvement 

criteria for new technology payments for 

the MitraClip® System and 

consideration of the public comments 

we received in response to the FY 2015 

IPPS/LTCH PPS proposed rule, we 

approved the MitraClip® System for 

new technology add-on payments for FY 

2015 (79 FR 49946). As discussed in the 

FY 2015 IPPS/LTCH PPS final rule, this 

approval is on the basis of using the 

MitraClip® consistent with the NCD. 

Cases involving the MitraClip® System 

that are eligible for the new technology 

add-on payments are currently 

identified by ICD–9–CM procedure code 

35.97. The average cost of the 

MitraClip® System is reported as 

$30,000. Under section 412.88(a)(2), 

new technology add-on payments are 

limited to the lesser of 50 percent of the 

average cost of the device or 50 percent 

of the costs in excess of the MS–DRG 

payment for the case. As a result, the 

maximum new technology add-on 

payment for a case involving the 

MitraClip® System is $15,000 for FY 

2015. 

With regard to the newness criterion 

for the MitraClip® System, we 

considered the beginning of the 

newness period to commence when the 

MitraClip® System was approved by the 

FDA on October 24, 2013. Because the 

3-year anniversary date of the entry of 

the MitraClip® System on the U.S. 

market will occur in FY 2017 (October 

24, 2016), we are proposing to continue 

new technology add-on payments for 

this technology for FY 2016. We are 

inviting public comments on this 

proposal. 

Because we are adopting the ICD–10 

coding system, beginning October 1, 

2015, as discussed in section II.G.1.a, of 

the preamble of this proposed rule, for 

FY 2016, we are proposing to identify 

and make new technology add-on 

payments for cases involving the 

MitraClip® System using ICD–10–PCS 

procedure code 02UG3JZ (Supplement 

mitral valve with synthetic substitute, 

percutaneous approach). The maximum 

payment for a case involving the 

MitraClip® System would remain at 

$15,000 for FY 2016. We are inviting 

public comments on this proposal. 

h. Responsive Neurostimulator (RNS®) 

System 

NeuroPace, Inc. submitted an 

application for new technology add-on 

payments for FY 2015 for the use of the 

RNS® System. (We note that the 

applicant submitted an application for 

new technology add-on payments for FY 

2014, but failed to receive FDA approval 

prior to the July 1 deadline.) Seizures 

occur when brain function is disrupted 

by abnormal electrical activity. Epilepsy 

is a brain disorder characterized by 

recurrent, unprovoked seizures. 

According to the applicant, the RNS®

System is the first implantable medical 

device (developed by NeuroPace, Inc.) 

for treating persons diagnosed with 

epilepsy whose partial onset seizures 

have not been adequately controlled 

with antiepileptic medications. The 

applicant further stated that, the RNS®

System is the first closed-loop, 

responsive system to treat partial onset 

seizures. Responsive electrical 

stimulation is delivered directly to the 

seizure focus in the brain when 

abnormal brain activity is detected. A 

cranially implanted programmable 

neurostimulator senses and records 

brain activity through one or two 

electrode-containing leads that are 

placed at the patient’s seizure focus/

foci. The neurostimulator detects 

electrographic patterns previously 

identified by the physician as abnormal, 

and then provides brief pulses of 

electrical stimulation through the leads 

to interrupt those patterns. Stimulation 

is delivered only when abnormal 

electrocorticographic activity is 

detected. The typical patient is treated 

with a total of 5 minutes of stimulation 

a day. The RNS® System incorporates 

remote monitoring, which allows 

patients to share information with their 

physicians remotely. 

With respect to the newness criterion, 

the applicant stated that some patients 

diagnosed with partial onset seizures 

that cannot be controlled with 

antiepileptic medications may be 

candidates for the vagus nerve 

stimulator (VNS) or for surgical removal 

of the seizure focus. According to the 

applicant, these treatments are not 

appropriate for, or helpful to, all 

patients. Therefore, the applicant 

believed that there is an unmet clinical 

need for additional therapies for partial 

onset seizures. The applicant further 

stated that the RNS® System addresses 

this unmet clinical need by providing a 

novel treatment option for treating 

persons diagnosed with medically 

intractable partial onset seizures. The 

applicant received FDA premarket 

approval on November 14, 2013. 

After evaluation of the newness, costs, 

and substantial clinical improvement 

criteria for new technology payments for 

the RNS® System and consideration of 

the public comments we received in 

response to the FY 2015 IPPS/LTCH 

PPS proposed rule, we approved the 

RNS® System for new technology addon payments for FY 2015 (79 FR 49950). 

Cases involving the RNS® System that 

are eligible for new technology add-on 

payments are currently identified using 

the following ICD–9–CM procedure 

codes: 01.20 (Cranial implantation or 

replacement of neurostimulator pulse 


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generator) in combination with 02.93 

(Implantation or replacement of 

intracranial neurostimulator lead(s)). 

According to the applicant, cases using 

the RNS® System would incur an 

anticipated cost per case of $36,950. 

Under § 412.88(a)(2) of the regulations, 

new technology add-on payments are 

limited to the lesser of 50 percent of the 

average costs of the device or 50 percent 

of the costs in excess of the MS–DRG 

payment rate for the case. As a result, 

the maximum new technology add-on 

payment for cases involving the RNS®

System is $18,475. 

With regard to the newness criterion 

for the RNS® System, we considered the 

beginning of the newness period to 

commence when the RNS® System was 

approved by the FDA on November 14, 

2013. Because the 3-year anniversary 

date of the entry of the RNS® System on 

the U.S. market will occur in FY 2017 

(November 14, 2016), we are proposing 

to continue new technology add-on 

payments for this technology for FY 

2016. We are inviting public comments 

on this proposal. 

Because we are adopting the ICD–10 

coding system effective October 1, 2015, 

as discussed in section II.G.1.a. of the 

preamble of this proposed rule, we are 

proposing to identify and make new 

technology add-on payments for cases 

involving the RNS® System using the 

following ICD–10–PCS procedure code 

combination: 0NH00NZ (Insertion of 

neurostimulator generator into skull, 

open approach) in combination with 

00H00MZ (Insertion of neurostimulator 

lead into brain, open approach). The 

maximum payment for a case involving 

the RNS® System would remain at 

$18,475 for FY 2016. We are inviting 

public comments on this proposal. 

5. FY 2016 Applications for New 

Technology Add-On Payments 

We received applications for nine 

new technology add-on payments for FY 

2016. In accordance with the regulations 

under § 412.87(c), applicants for new 

technology add-on payments must have 

FDA approval by July 1 of each year 

prior to the beginning of the fiscal year 

that the application is being considered. 

A discussion of the applications is 

presented below. 

a. Angel Medical Guardian® Ischemic 

Monitoring Device 

Angel Medical Systems, Inc. 

submitted an application for new 

technology add-on payments for the 

Angel Medical Guardian® Ischemic 

Monitoring Device (hereinafter referred 

to as the Guardian®). The Guardian®

implantable ischemia detection system 

is designed to provide early detection 

and patient alerts for ischemic and other 

cardiac events experienced by 

ambulatory patients. The device 

consists of an implantable monitoring 

device (IMD) that communicates with 

an external device (EXD) via telemetry. 

The IMD monitors the patient’s current 

cardiac data and compares these data to 

the patient’s historical baseline using 

thresholds that reflect the normal 

ischemic range for each individual. 

Upon detection of a cardiac anomaly, 

the implanted IMD vibrates and 

provides one of two distinguishable 

alerts, ‘‘emergency alarms’’ and ‘‘see 

doctor alerts,’’ which prompt the patient 

to initiate emergency and/or 

preventative actions. The system also 

includes a program that allows 

physicians to adjust the settings for 

event detection and subsequent alerts. 

With respect to the newness criterion, 

the applicant anticipates FDA premarket 

approval during June 2015. The 

Guardian® technology is a Class III 

device that has obtained an 

investigational device exemption (IDE) 

from the FDA under IDE number 

G060259. Effective October 1, 2006 (FY 

2007), ICD–9–CM procedure codes 

00.56 (Insertion or replacement of 

implantable pressure sensor (lead) for 

intracardiac hemodynamic monitoring) 

and 00.57 (Implantation or replacement 

of subcutaneous device for intracardiac 

hemodynamic monitoring) were created 

to describe specific types of cardiac 

procedures. There have been minor 

revisions to each of the procedure 

codes’ title and description over the 

years to better differentiate procedures 

being performed with various 

technologies. As of October 1, 2011 (FY 

2012), these codes distinguish 

procedures using the Guardian®

technology from other similar 

procedures that use various 

technologies. The current ICD–9–CM 

procedure code titles are as follows: 

00.56 (Insertion or replacement of 

implantable pressure sensor with lead 

for intracardiac or great vessel 

hemodynamic monitoring), and 00.57 

(Implantation or replacement of 

subcutaneous device for intracardiac or 

great vessel hemodynamic monitoring). 

As stated earlier in section II.G.1.a. of 

the preamble of this proposed rule, 

effective October 1, 2015 (FY 2016), the 

ICD–10 coding system will be 

implemented. Under ICD–10, procedure 

code 02HK32Z (Insertion of monitoring 

device into right ventricle, percutaneous 

approach) is the comparable translation 

for ICD–9–CM procedure code 00.56, 

and procedure code 0JH602Z (Insertion 

of monitoring device into chest 

subcutaneous tissue and fascia, open 

approach) is the comparable translation 

for ICD–9–CM procedure code 00.57, 

which specifically describe procedures 

involving the Guardian® technology. We 

note that, in accordance with 

§ 412.87(c), in order for a technology to 

be considered for new technology addon payments for a particular fiscal year, 

the technology must be approved by the 

FDA by July 1 prior to the particular 

fiscal year for which add-on payments 

are requested. According to the 

applicant, there are no other treatment 

modalities that perform the same 

function as the Guardian® technology. 

Therefore, the applicant believed that 

the Guardian® technology is not 

substantially similar to any other 

currently approved technology. We are 

inviting public comments on whether 

the Guardian® technology meets the 

newness criterion. 

With respect to the cost criterion, the 

applicant determined that cases 

involving the Guardian® technology 

map to MS–DRG 264 (Other Circulatory 

System O.R. Procedures). The applicant 

initially provided a sensitivity analysis 

performed using all of the cases 

assigned to MS–DRG 264, without 

isolating a subset of cases that would be 

eligible for treatment using the 

Guardian® technology. In follow up to 

our request for a more focused analysis 

that calculates an average case-weighted 

standardized charge per case for cases 

involving the Guardian® technology 

assigned to MS–DRG 264, the applicant 

submitted a revised analysis that used 

data from a subset of cases representing 

patients who received treatment 

involving the implantation of 

pacemakers that mapped to MS–DRG 

243 (Pacemaker Implant with CC). The 

applicant searched the Healthcare Cost 

and Utilization Project (HCUP) database 

for patient profiles that indicated prior 

myocardial infarction with 

comorbidities such as malignant 

hypertension (reported using ICD–9–CM 

diagnosis code 401.0), other acute and 

subacute forms of ischemic disease 

(reported using ICD–9–CM diagnosis 

code 411.89), and intermediate coronary 

syndrome (that is, unstable angina 

reported using ICD–9–CM diagnosis 

code 411.1). According to the applicant, 

all of the patients enrolled in the 

ALERTS pivotal clinical study exhibited 

at least one or more of these 

comorbidities, similar to many of the 

patients represented by cases assigned 

to MS–DRG 243. The applicant asserted 

that the results from the revised search 

of the HCUP database revealed patient 

profiles that were similar to the patients 

who would have likely been 

recommended for treatment using the 


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Guardian® technology, which are 

represented by the cases assigned to 

MS–DRG 264. The applicant identified 

843 cases assigned to MS–DRG 243, 

which represents patients treated with 

pacemaker implantations by the 

hospitals that participated in the 

Guardian® ALERTS clinical study. 

The applicant used data from 

multiple sources to compute an average 

case-weighted standardized charge per 

case for procedures involving the 

Guardian® technology. The applicant 

began by determining the specific FY 

2015 Medicare IPPS Federal rate for 

cases assigned to MS–DRG 243 that 

were treated by each hospital that 

participated in the Guardian® ALERTS 

clinical study. The applicant then 

adjusted this amount by a factor of 

1.057, which was derived from the 

March 2014 MedPAC Report to 

Congress on Medicare payment policies, 

to convert the Medicare payment to 

actual costs incurred by each hospital 

for each case. Specifically, the applicant 

determined this adjustment factor by 

subtracting the average industry wide 

margin of ¥5.4 percent, or ¥0.054 

percent, for hospitals during 2012, 

which was reflected in the March 2014 

Report to Congress, from a factor of 1, 

which results in the percentage of 

inpatient costs that Medicare paid 

(1¥0.054 = 94.6), and then divided this 

amount by 100 (100/94.6 = 1.057). To 

convert the adjusted Medicare payment 

amount to charges, the applicant 

applied hospital-specific CCRs found in 

the FY 2015 IPPS final rule impact file. 

The applicant computed an average 

case-weighted standardized charge per 

case by weighting the number of 

implants performed using the 

Guardian® technology performed by 

each hospital participating in the 

Guardian® ALERTS clinical study to the 

overall number of implants performed 

and represented by cases assigned to 

MS–DRG 243. This resulted in an 

average case-weighted standardized 

charge per case of $75,010. The 

applicant then deducted device-related 

charges for a pacemaker based on data 

obtained from the FY 2015 After 

Outliers Removed (AOR) File to 

determine the nonimplant resources 

used during these types of procedures, 

and added the device-related charges for 

the Guardian® technology, which 

resulted in an adjusted average caseweighted charge per case of $89,050. 

Because this adjusted average caseweighted standardized charge per case 

exceeds the average case-weighted 

threshold amount of $65,544 for MS– 

DRG 264 as displayed in Table 10 of the 

FY 2015 IPPS/LTCH PPS final rule, the 

applicant maintained that the 

Guardian® technology meets the cost 

criterion. 

We have several concerns regarding 

the applicant’s cost analysis. We do not 

believe that it is appropriate to convert 

Medicare payments for discharges to 

actual costs incurred by hospitals by 

applying a margin adjustment factor and 

hospital-specific CCRs to determine an 

average case-weighted standardized 

charge for specific cases. According to 

the regulations under 42 CFR 

412.2(b)(1), the prospective payment 

amount paid for inpatient hospital 

services is the total Medicare payment 

for the inpatient operating costs and the 

inpatient capital-related costs incurred 

in furnishing services covered by the 

Medicare program. The prospective 

payment amount represents a payment 

amount for the total cost of inpatient 

hospital services incurred by hospitals 

participating in the Medicare program, 

but does not represent a measure of the 

actual costs per case. For example, two 

hospitals in the same CBSA will be paid 

the same prospective payment amount 

for a case assigned to the same MS– 

DRG. The fact that these hospitals are 

paid the same prospective payment 

amount does not imply that the 

hospitals incurred the same amount of 

costs per case. On the contrary, the 

hospitals probably incurred very 

different costs for each case and the 

prospective payment amount is simply 

a payment for the inpatient costs 

covered by Medicare. Therefore, we are 

concerned about the methodology used 

by the applicant to determine an average 

case-weighted standardized charge per 

case, and do not believe that the 

calculation of this amount determined 

by the applicant is accurate. Moreover, 

we are concerned that the applicant 

assumed that the patient profiles for 

patient treated with pacemaker 

implantations and patients treated using 

the Guardian® technology are similar 

enough to warrant the inclusion of cases 

assigned to MS–DRG 243 in the analysis 

and then to depend upon the results of 

that analysis as a basis to demonstrate 

that the technology meets the cost 

criterion. In addition, we do not believe 

that it is appropriate to assume that the 

resources used during procedures 

involving pacemaker implantations and 

procedures involving the Guardian®

technology would be the same, and the 

applicant does not provide a rationale 

for assuming such similarities. Because 

of these concerns, we are unable to 

determine if the technology meets the 

cost criterion. We are inviting public 

comments on whether the Guardian®

technology meets the cost criterion, 

particularly with respect to the concerns 

we have raised. 

With respect to the substantial 

clinical improvement criterion, the 

applicant asserted that this technology 

provides a more rapid beneficial 

resolution to ischemic and other cardiac 

events in ambulatory patients that 

reduces mortality and morbidity, and 

facilitates a faster patient presentation 

time to initiate treatment for these types 

of disorders. The applicant also believed 

that this technology fulfills an unmet 

clinical need for early diagnoses and 

preventative treatment options for a 

patient population that experiences 

silent, asymptomatic ischemia. The 

applicant included data from its pivotal 

ALERTS clinical trial, a randomized 

study expanding over a 6-month period 

of patients who were treated using the 

Guardian® technology and with the 

alarm function turned on (which 

represented the treatment group) or the 

alarm function turned off (which 

represented the control group). The 

primary efficacy endpoint was a 

composite variable that considered 

cardiac or unexplained death, new 

death Q-wave MI, or delayed 

presentation (time to door >2 hours) for 

a documented coronary occlusion event. 

The primary safety outcome measure 

was device-related complications. 

According to the applicant, the 

following findings demonstrate that the 

Guardian® technology represents a 

substantial clinical improvement in 

regard to currently available treatment 

options for Medicare beneficiaries: 

• The treatment group showed 

statistically significant clinical 

improvement over the control group 

using a composite outcome variable; 

• 97 percent of patients treated with 

implantations using the Guardian®

technology were free from systemrelated complications at 6 months post 

programming; 

• A reduced proportion of patients 

having pre-hospital delays over 2 hours 

for a confirmed thrombotic coronary 

occlusive event; 

• A reduction in the median time-todoor for patients treated using the 

Guardian® technology alert system 

turned on (51 minutes) versus patients 

treated using the Guardian® technology 

alert system turned off (1,808 minutes); 

and 

• An improvement in the overall 

quality of life, and greater control over 

the condition, including feeling safer, 

for patients who were enrolled in the 

ALERTS trial and participated in a 2012 

quality of life study that were treated 

with the Guardian® technology when 

the alarm system was activated. 


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We are concerned that the outcome 

measures, including the quality of life 

measures, are based on and reflective of 

factors other than the efficacy of the 

device. For instance, any benefit from 

using the Guardian® technology 

depends entirely upon the patient 

heeding the alarms and alerts and 

seeking emergency medical care without 

delay. Moreover, we are concerned that 

the ALERTS pivotal trial uses inherently 

different methods of ascertainment of 

‘‘delayed presentation’’ for the treatment 

group and the control group after an 

ischemic event, which implies a serious 

bias in regard to the clinical trial results. 

We believe that this bias questions the 

validity of the primary efficacy 

endpoint. An additional concern is that 

the ALERTS pivotal trial uses a very 

broad definition of a ‘‘confirmed 

thrombotic event.’’ Although the pivotal 

trial used four different criteria to 

determine whether such an event 

occurred, only two of them are actually 

evidence of an acute coronary event for 

which timely patient presentation for 

medical care might improve outcomes. 

The applicant did indicate how many 

confirmed events met each of the four 

criteria. 

We are inviting public comments on 

if, and how, the Guardian® technology 

meets the substantial clinical 

improvement criterion, particularly 

with respect to the concerns we have 

raised. 

Below we summarize and respond to 

the comments submitted on the 

Guardian® technology at the Town Hall 

meeting. 

Comment: Several participants in the 

ALERTS clinical trial submitted 

comments supporting the approval of 

new technology add-on payments for 

the Guardian® technology. According to 

the commenters, use of the Guardian®

technology is associated with 

substantial clinical improvement of 

patients at high risk for a repeat 

myocardial infarction. The commenters 

stated that experiences as part of the 

ALERTS study have been positive. In 

addition, the commenters agreed with 

the applicant that patients implanted 

with an active Guardian® device who 

were alerted to a confirmed myocardial 

infarction event arrived at a medical 

facility significantly faster than those 

generally treated using the regular 

standard of care. Moreover, the 

commenters agreed with the applicant 

that patients are reassured by the 

effectiveness of the Guardian® device as 

a means of monitoring and protection. 

The commenters believed that the 

Guardian® device provides patients and 

providers with an important tool for 

helping to recognize when a significant 

ischemic event occurs and when to seek 

prompt medical treatment, which result 

in reduced morbidity and mortality, 

fewer visits to the emergency room and 

unnecessary hospitalizations, and 

reduced health care expenditures. The 

commenters believed that the 

Guardian® device meets the substantial 

clinical improvement criterion because 

the device offers a more rapid and 

beneficial resolution for treating 

patients by its capability to diagnose a 

medical condition in a patient 

population where the condition is 

currently undetectable as well as offers 

a treatment option to a patient 

population unresponsive to currently 

available treatments. 

One commenter, a principal 

investigator in the ALERTS study, 

further reported that treatment using the 

Guardian® device tended to reduce the 

incidence of Q waves, a primary clinical 

endpoint that has important 

ramifications in both morbidity and 

mortality rates. The commenter also 

noted that, based on the results of the 

ALERTS study, asymptomatic 

thrombotic events were recognized in 21 

of 451 (4.6 percent) of patients in the 

Guardian® treatment arm, and that the 

vast majority of these patients arrived to 

a medical facility within an hour of the 

onset of the event. In contrast, patients 

in the control arm who experienced 

asymptomatic ischemic events recorded 

by the Guardian® device arrived to a 

medical facility between 10 and 77 days 

after the event. According to the 

commenter, many of these patients 

experienced a silent myocardial 

infarction, which occurs over time in a 

significant number of patients and can 

lead to higher mortality rates. The 

commenter believed that the Guardian®

device provides a significant benefit to 

a patient population that experiences 

asymptomatic ischemic events and does 

not receive any physical warnings of 

their condition, and who would 

otherwise not seek treatment for a 

longer period of time than what is 

recommended in the medical 

community, if treatment is sought at all. 

Another commenter provided 

additional information on the 

opportunity for improvement upon time 

to treatment for patients at high risk for 

a recurrent myocardial infarction, which 

would in turn lead to improved clinical 

outcomes, particularly for the patient 

population experiencing asymptomatic 

ischemia. According to the commenter, 

approximately 50 percent of patients 

experiencing myocardial infarction have 

no symptoms at all or symptoms that 

may not be recognized, and often do not 

receive any acute therapy to avert or 

mitigate the impact of the infarction. 

The commenter stated that the current 

standard of care requires patients to 

recognize symptoms of heart attack and 

seek medication immediately, and, for 

every 30 minute delay in treatment, 

there is an associated 8.5 percent 

increased risk of developing an ejection 

fraction of less than 30 percent, which 

is highly correlated with subsequent 

heart failure, and an associated 7.5 

percent relative risk increase in 1 year 

mortality. Therefore, the commenter 

believed that the Guardian® device 

presents a significant opportunity to 

address improvement in the timing of 

treatment for patients at high risk for a 

recurrent myocardial infarction. 

Response: We appreciate the 

commenters’ input. We will take these 

comments into consideration when 

deciding whether to approve new 

technology add-on payments for the 

Guardian® device. 

b. Blinatumomab (BLINCYTOTM) 

Amgen, Inc. submitted an application 

for new technology add-on payments for 

Blinatumomab (BLINCYTOTM), a bispecific T-cell engager (BiTE) used for 

the treatment of Philadelphia 

chromosome-negative (Ph-) relapsed or 

refractory (R/R) B-cell precursor acutelymphoblastic leukemia (ALL), which is 

a rare aggressive cancer of the blood and 

bone marrow. Approximately 6,050 

individuals are diagnosed with ALL in 

the United States each year, and 

approximately 2,400 individuals, which 

represents 30 percent of all new cases, 

are adults. ALL occurs when there are 

malignant transformations of B-cell or 

T-cell progenitor cells, causing an 

accumulation of lymphoblasts in the 

blood, bone marrow, and occasionally 

throughout the body. As a bi-specific Tcell engager, the BLINCYTOTM

technology attaches to a molecule on the 

surface of the tumorous cell, as well as 

to a molecule on the surface of normal 

T-cells, bringing the two into closer 

proximity and allowing the normal Tcell to destroy the tumorous cell. 

Specifically, the BLINCYTOTM

technology attaches to a cell identified 

as CD19, which is present on all of the 

cells of the malignant transformations 

that cause ALL and helps attract the cell 

into close proximity of the T-cell CD3 

with the intent of getting close enough 

to allow the T-cell to inject toxins that 

destroy the cancerous cell. 

BLINCYTOTM is administered as a 

continuous IV infusion delivered at a 

constant flow rate using an infusion 

pump. A single cycle of treatment 

consists of 28 days of continuous 

infusion, and each treatment cycle 

followed by 2 weeks without treatment 

prior to administering any further 


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treatments. A course of treatment 

consists of two phases. Phase 1 consists 

of initial inductions or treatments 

intended to achieve remission followed 

by additional inductions and treatments 

to maintain consolidation; or treatments 

given after remission has been achieved 

to prolong the duration. During phase 1 

of a single treatment course, up to two 

cycles of BLINCYTOTM are 

administered, and up to three additional 

cycles are administered during 

consolidation. The recommended 

dosage of BLINCYTOTM administered 

during the first cycle of treatment is 9 

mcg per day for the first 7 days of 

treatment. The dosage is then increased 

to 28 mcg per day for 3 weeks until 

completion. During phase 2 of the 

treatment course, all subsequent doses 

are administered as 28 mcg per day 

throughout the entire duration of the 28- 

day treatment period. 

With respect to the newness criterion, 

the BLINCYTOTM technology received 

FDA approval on December 3, 2014, for 

the treatment of patients diagnosed with 

Ph- R/R B-cell precursor ALL, and the 

product gained entry onto the U.S. 

market on December 17, 2014. As stated 

in section II.G.1.a. of the preamble of 

this proposed rule, effective October 1, 

2015 (FY 2016), the ICD–10 coding 

system will be implemented. We note 

that the applicant submitted a request 

for unique ICD–10–PCS codes that was 

presented at the March 18, 2015 ICD–10 

Coordination and Maintenance 

Committee meeting. If approved, the 

codes will be effective on October 1, 

2015 (FY 2016). More information on 

this request can be found on the CMS 

Web site located at: http://

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

According to the applicant, the 

BLINCYTOTM technology is the first, 

and the only, bi-specific CD19-directed 

CD3 T-cell engager single-agent 

immunotherapy approved by the FDA. 

However, we are concerned that 

BLINCYTOTM may be substantially 

similar to other bi-specific T-cell 

engagers. In the FY 2010 IPPS/RY 2010 

LTCH PPS final rule (74 FR 43813 

through 43814), we established criteria 

for evaluating whether a new 

technology is substantially similar to an 

existing technology, specifically: (1) 

Whether a product uses the same or a 

similar mechanism of action to achieve 

a therapeutic outcome; (2) whether a 

product is assigned to the same or a 

different MS–DRG; and (3) whether the 

new use of the technology involves the 

treatment of the same or similar type of 

disease and the same or similar patient 

population. If a technology meets all 

three of these criteria, it would be 

considered substantially similar to an 

existing technology and would not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. For a 

detailed discussion of the criteria for 

substantial similarity, we refer readers 

to the FY 2006 IPPS final rule (70 FR 

47351 through 47352), and the FY 2010 

IPPS/LTCH PPS final rule (74 FR 43813 

through 43814). 

With regard to the first criterion, we 

are concerned that the mechanism of 

action of the BLINCYTOTM technology 

does not appear to differ from those of 

other bi-specific T-cell engagers, which 

also attract the cancerous cell within 

close proximity of a normal T-cell with 

the intent of allowing the cell to get 

close enough to inject toxins to destroy 

the cancerous cell. There are several 

other BiTEs currently under 

investigation, including MT110 that are 

used for the treatment of patients 

diagnosed with gastrointestinal and 

lung cancers and are directed towards 

the EpCAM antigen, as well as MCSPspecific and CD33-specific BiTEs used 

for treating patients diagnosed with 

melanoma and acute myeloid leukemia, 

respectively. We believe that the feature 

that distinguishes the BLINCYTOTM

technology from these other bi-specific 

T-cell engagers is that it specifically 

targets the CD19 cell. However, we are 

concerned that the specificity of the 

mechanism of action may not be 

sufficient to distinguish the 

BLINCYTOTM technology from other bispecific T-cell engagers and, therefore, 

the technology bears substantial 

similarity to these other BiTEs used as 

current treatment options for Medicare 

beneficiaries. Further, we are concerned 

that determining that the BLINCYTOTM

technology meets the newness criterion 

based on the specificity of the 

mechanism of action would set a 

precedent that a drug employing the 

same mechanism of action could be 

considered ‘‘new’’ based on such 

specificity when evaluated under the 

substantial similarity criterion. 

With respect to the second criterion, 

the applicant maintained that ICD–9– 

CM diagnosis codes 204.00 (Acute 

lymphoid leukemia, without mention of 

having achieved remission) and 204.02 

(Acute lymphoid leukemia in relapse) 

are used to identify patients who may 

potentially be eligible for treatment 

using the BLINCYTOTM technology. 

Using these diagnosis codes, the 

applicant researched claims data from 

the FY 2013 MedPAR file and found 

cases across a wide spectrum of MS– 

DRGs, not all of which are related to 

acute lymphoblastic leukemia. 

According to the applicant, 42.1 percent 

of all cases representing patients 

diagnosed with ALL were assigned to 

238 MS–DRGs. Therefore, we believe 

that potential cases involving the 

BLINCYTOTM technology may be 

assigned to the same MS–DRG(s) as 

other cases involving bi-specific T-cell 

engagers used to treat patients with 

leukemia. 

With respect to the third criterion, 

according to the applicant, the standard 

treatment for patients diagnosed with 

ALL currently requires the use of 

multiple, intensive chemotherapy 

treatment drugs in combination to 

induce remission in order to allow the 

patient the opportunity to proceed to 

allogenic hematopoietic stem cell 

transplant (alloHSCT), which is the next 

stage in the course of treatment and the 

only known curative option. The 

applicant asserted that the 

BLINCYTOTM technology is not 

substantially similar to other treatment 

options because it does not involve the 

treatment of the same, or similar, type 

of diseases or the same, or similar, 

patient population. The commenter 

stated that, although chemotherapy is a 

successful treatment option to induce 

remission in patients diagnosed with R/ 

R ALL, many of these patients relapse 

or stop responding to this standard 

treatment and, therefore, are be unable 

to proceed to alloHSCT, the next stage 

of treatment. Moreover, chemotherapy 

toxicities can be cumulative. Therefore, 

the commenter stated, patients who 

have received intensive treatments may 

not be eligible for further intensive 

chemotherapy treatments and, therefore, 

are unable to proceed to alloHSCT. The 

applicant asserted that the 

BLINCYTOTM technology is an anticancer immunotherapy that has shown 

to be effective in the treatment of a 

patient population in which 

chemotherapy has not been successful. 

Moreover, the applicant asserted that, as 

an anti-cancer immunotherapy, the 

BLINCYTOTM technology does not 

demonstrate the cumulative side-effects 

typically associated with chemotherapy 

treatments and, therefore, is a treatment 

option available to patients who are not 

eligible for further chemotherapy 

treatments based on the risks associated 

with cumulative toxicities. However, we 

are concerned that this specific patient 

population is not necessarily 

distinguishable from the overall patient 

population of individuals diagnosed 

with ALL, and we are unsure how to 

identify these patients using 

administrative claims data. 

We believe that the BLINCYTOTM

technology may be similar to other 

approved technologies currently 

available to treat the same patient 


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population and medical disorders and, 

therefore, may not meet the newness 

criterion. In addition, we do not believe 

that the specific patient population 

targeted by the applicant is sufficiently 

distinguishable from the overall patient 

population that may be eligible for 

treatment using options that are 

currently available for these types of 

medical disorders. We are seeking 

public comments on if, and how, the 

BLINCYTOTM technology meets the 

newness criterion. 

With respect to the cost criterion, the 

applicant researched claims data in the 

FY 2013 MedPAR file, which contained 

inpatient hospital discharges from 

October 1, 2012, to September 30, 2013, 

and identified cases reporting ICD–9– 

CM diagnosis codes 204.00 (Acute 

lymphoid leukemia, without mention of 

having achieved remission) and 204.02 

(Acute lymphoid leukemia in relapse), 

which represent patients who may 

potentially be eligible for treatment 

using the BLINCYTOTM technology. The 

applicant found 2,649 cases across 246 

MS–DRGs, including MS–DRGs 834 

through 836 (Acute Leukemia without 

Major Operating Room Procedure, with 

MCC, with CC, and without CC/MCC, 

respectively) and MS–DRGs 837 through 

839 (Chemotherapy with Acute 

Leukemia as Secondary Diagnosis, with 

MCC, with CC, and without CC/MCC, 

respectively), which represent 

approximately 48.1 percent of all cases 

with patients diagnosed with ALL. The 

applicant also found that MS–DRG 809 

(Major Hematological and Immunologic 

Diagnoses Except Sickle Cell Crisis and 

Coagulations Disorders with CC) and 

MS–DRG 871 (Septicema or Severe 

Sepsis without Mechanical Ventilation 

96+ Hours with CC) contained cases that 

further represent 9.8 percent of all cases 

representing patients diagnosed with 

ALL. The cases assigned to the 

remaining 238 MS–DRGs represent a 

combined 42.1 percent of all cases 

representing patients diagnosed with 

ALL, with no single MS–DRG 

containing cases representing more than 

2.0 percent of all cases representing 

patients diagnosed with ALL. The 

applicant also noted that when 

identifying cases that may be eligible for 

the BLINCYTOTM technology, it 

excluded any claims for discharges paid 

by Medicare Advantage plans, as well as 

any claims submitted by Medicare PPSexempt cancer hospitals. 

Because the applicant was unable to 

provide a single estimate of the charges 

that would be avoided by using the 

BLINCYTOTM technology (that is, 

additional charges incurred during 

treatment using other technologies), the 

applicant conducted its own cost 

analysis using two scenarios for each 

group of MS–DRGs. The first scenario 

assumed that 50 percent of the charges 

for drugs would be eliminated by using 

the BLINCYTOTM technology, and the 

second scenario assumed that 75 

percent of the charges for drugs would 

be eliminated. The applicant further 

conducted sensitivity analyses for each 

of the top eight MS–DRGs containing 

cases eligible for the BLINCYTOTM

technology, as well as a sensitivity 

analysis for all of the other MS–DRGs 

outside of the top eight to which eligible 

cases mapped. The applicant then 

examined the average case-weighted 

standardized charge per case and the 

average case-weighted threshold amount 

for all 2,649 cases identified during FY 

2013 across all 246 MS–DRGs, and for 

1,533 cases during FY 2013 across the 

top 8 MS–DRGs to demonstrate that the 

technology meets the cost criterion. 

Under the analysis’ first scenario, 50 

percent of the charges for drugs incurred 

by using other technologies were 

removed in order to exclude the charges 

associated with the use of these 

technologies. The applicant determined 

an average case-weighted threshold 

amount of $60,278 for the 2,649 ALL 

cases in the 246 MS–DRGs identified 

using the thresholds in Table 10 in the 

FY 2015 IPPS/LTCH PPS final rule. The 

applicant also determined an average 

case-weighted standardized charge per 

case of $245,006, or $184,728 above the 

average case-weighted threshold 

amount. For the subset of 1,533 cases 

that mapped to the top 8 MS–DRGs, the 

applicant determined an average caseweighted threshold amount of $65,478 

using the threshold in Table 10 in the 

FY 2015 IPPS/LTCH PPS final rule. The 

applicant also determined an average 

case-weighted standardized charge per 

case of $249,354, or $183,876 above the 

average case-weighted threshold 

amount. Based on the applicant’s 

analyses, we believe that the 

BLINCYTOTM technology meets the cost 

criterion under the first scenario. 

Under the second scenario, the 

applicant removed 75 percent of charges 

for drugs incurred by using other 

technologies in order to exclude the 

charges associated with the use of these 

technologies. The applicant determined 

an average case-weighted threshold 

amount of $60,278 for the 246 MS– 

DRGs identified using the thresholds 

from Table 10 in the FY 2015 IPPS/

LTCH PPS final rule. The applicant 

determined an average case-weighted 

standardized charge per case of 

$239,321, or $179,043 above the average 

case-weighted threshold amount. For 

the subset of 1,533 cases that mapped to 

the top 8 MS–DRGs, the applicant 

determined an average case-weighted 

threshold amount of $65,478 using the 

thresholds from Table 10 in the FY 2015 

IPPS/LTCH PPS final rule. The 

applicant determined an average caseweighted standardized charge per case 

of $242,423, or $176,945 above the 

average case-weighted threshold 

amount. Based on the applicant’s 

analyses, we believe that the 

BLINCYTOTM meets the cost criterion 

under the second scenario. 

In conducting the above analyses, the 

applicant summarized the charges from 

the claims it identified and standardized 

the charges using an unspecified data 

source. The applicant then inflated all 

charges from FY 2013 to FY 2015 using 

the 10.4427 percent inflation factor used 

by CMS to update the FY 2015 outlier 

threshold. In determining the costs for 

the technology per case, the applicant 

also assumed that the BLINCYTOTM

technology would be administered for 

28 days during each inpatient stay. The 

applicant also assumed a hospital 

markup of 2.0 percent, and applied this 

amount to its estimated charges per 

case. 

We have three concerns regarding the 

applicant’s methodology and 

assumptions used in its cost analyses. 

We are concerned that the applicant did 

not specify whether it used the FY 2015 

IPPS final rule impact file or another 

data source to standardize the charges 

per case for this technology. We also are 

concerned that the applicant did not 

provide a basis for the hospital markup 

assumed when conducting its cost 

analyses. Unless the applicant provides 

this information, we are unable to 

determine whether the cost of the 

technology per case has been calculated 

appropriately. Moreover, we are 

concerned that including charges 

representative of a full 28-day treatment 

cycle is not appropriate for the purpose 

of calculating the charges associated 

with the BLINCYTOTM technology in 

order to determine whether the 

technology meets the cost criterion. 

According to the applicant, clinical trial 

data demonstrate that there are large 

subsets of patients who require 

inpatient care for the full 28-day 

treatment cycle because of the extreme 

clinical conditions relating to patients 

diagnosed with ALL. However, the 

applicant also conceded that only 25 

percent of patients enrolled in the U.S. 

clinical trial were hospitalized for the 

full 28-day treatment cycle, and only 38 

percent of these patients were over the 

age of 65. This causes us concern 

regarding whether the methodology 

used by the applicant in its cost analysis 

is appropriate. We are inviting public 

comments on if, and how, the 


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BLINCYTOTM technology meets the cost 

criterion, specifically in regard to our 

concerns related to the applicant’s 

methodology. 

With respect to the substantial 

clinical improvement criterion, the 

applicant asserted that the 

BLINCYTOTM technology represents a 

substantial clinical improvement for the 

treatment of patients diagnosed with R/ 

R ALL because it offers a treatment 

option for patients who may be 

unresponsive to currently available 

options for treatment, decreases the rate 

of subsequent therapeutic interventions 

for patients who might not have 

otherwise achieved remission, and 

reduces mortality. The applicant 

provided data analysis results from four 

sources to demonstrate that the 

technology represents a substantial 

clinical improvement. These sources 

include a historical literature search, a 

model-based meta-analysis (Study 

118427), a historical comparator data 

(Study 20120310), and a pivotal clinical 

trial (Study MT 103–211). We 

summarize the results from each of 

these sources below. 

• The historical literature search 

revealed that superior regimens among 

currently used chemotherapeutic 

options result in a complete remission 

rate ranging from 18.0 percent to 38.6 

percent, a median overall survival rate 

for patients experiencing early first 

relapse (<12 months) at 4.7 months, and 

a median overall survival rate for 

patients experiencing second or later 

relapse at 3 months. However, there are 

several limitations to using recent 

literature as a historical comparison for 

studies relating to patients diagnosed 

with R/R ALL, including differences in 

patient populations or study design 

characteristics across published studies, 

which make it difficult to formulate 

absolute comparisons with regard to 

data obtained from the BLINCYTOTM

pivotal clinical trial. Therefore, the 

applicant conducted a model-based 

meta analysis (Studies 118427 and 

119384), and a historical comparator 

study (Study 20120310) to account for 

these differences. 

• In the model-based meta analysis 

(MBMA), the endpoints of complete 

remission (CR), duration of complete 

remission (DCR), and overall survival 

(OS) rate models were used to predict 

the efficacy of the BLINCYTOTM

technology in cases representing 

patients diagnosed with relapsed/

refractory ALL relative to patients 

treated using existing therapies. 

Simulations based on the MBMA for 

adult patients diagnosed with relapsed/ 

refractory B-precursor ALL projected a 

poor outcome with existing salvage 

therapies, and a significant increase in 

the proportion of CR, DCR, and OS rates 

in a population with the same summary 

prognostic factors as those enrolled in 

the BLINCYTOTM study MT103–211. 

For adult patients diagnosed with 

relapsed/refractory ALL who were 

treated with existing salvage therapies 

and having the same summary 

prognostic factors as those enrolled in 

the BLINCYTOTM study MT 103–211, 

the projected proportion of CR was 

0.121 (95 percent CI: 0.041 to 0.341), the 

median DCR rate was 4.9 months (95 

percent CI: 2.5 to 9.2 months), and the 

median OS rate was 3.9 months (95 

percent CI: 3.0 to 4.7 months). For adult 

patients diagnosed with R/R ALL having 

the same summary prognostic factors as 

those enrolled in the BLINCYTOTM

study MT 103–211, treatment using the 

BLINCYTOTM technology when 

compared with existing salvage 

therapies is expected to have an odds 

ratio for proportion of CR of 3.50 (95 

percent CI: 1.63 to 8.40), a hazard ratio 

for DCR of 0.53 (95 percent CI: 0.30 to 

0.89), and a hazard ratio for OS of 0.60 

(95 percent CI: 0.47 to 0.76). The 

applicant maintained that these results 

suggest that the BLINCYTOTM

technology is associated with a reduced 

mortality rate and improved clinical 

outcomes when compared to standard 

chemotherapy treatment options. 

• A historical comparator study was 

also conducted to obtain patient-level 

data for standard of care treatment 

options for patients experiencing early 

first relapse, refractory relapse after 

HSCT, and second or greater relapse in 

the same patient population as targeted 

in the BLINCYTOTM pivotal clinical 

trial. Study 20120310 was a 

retrospective pooled analysis of 

historical data available from 1990 to 

2014 on hematological remission and 

survival rates among patients diagnosed 

with Ph- R/R B-cell precursor ALL who 

were treated with standard of care 

therapies. The primary study endpoint 

was CR following relapse or salvage 

treatment; and secondary endpoints 

included estimates of OS rates, RFS 

rates, and the proportion of patients 

receiving alloHSCT. The weighted 

median OS rate for 1,112 patients based 

on available data was 3.3 months (95 

percent CI: 2.8 to 3.6 months) and was 

calculated from the start of the last 

salvage treatment or the first relapse (if 

start of the last salvage date was 

unavailable) until the time of death. The 

weighted OS rate at 6 and 12 months 

was 30 percent (95 percent CI: 27 

percent to 34 percent) and 15 percent 

(95 percent CI: 13 percent to 18 

percent), respectively. Among the 

patients who achieved CR based on 

available data (108 patients), the 

weighted median RFS rate was 5.0 

months (95 percent CI: 1.2 to 6.6 

months). Among the 808 patients who 

received alloHSCT after salvage therapy 

based on available data, 18 percent (95 

percent CI: 15 percent to 21 percent) 

received alloHSCT following the last 

line of salvage therapy, and among 

patients who achieved CR, 7 percent (95 

percent CI: 5 percent to 9 percent) 

received alloHSCT. The applicant 

maintained that these results highlight 

the poor health care outcomes for 

patients treated with standard 

chemotherapy and that BLINCYTOTM

represents a significant improvement. 

• BLINCYTOTM study MT 103–211 is 

a pivotal clinical study providing 

efficacy data for the BLINCYTOTM

technology used for the treatment of 

adult patients diagnosed with Ph- R/R 

B-cell precursor ALL. It is a phase 2, 

single-arm study that included a 

particularly difficult patient population 

to treat consisting of patients diagnosed 

with Ph- B-cell precursor ALL who 

experienced either: (1) R/R after 

remission during 12 months or less of 

the first salvage treatment; (2) R/R after 

the first salvage treatment; or (3) R/R 

within 12 months after receiving 

alloHSCT. The primary endpoint was 

the rate of CR plus CRh within the first 

2 cycles of treatment using the 

BLINCYTOTM technology. The key 

secondary endpoints include best 

overall response within 2 cycles of 

treatment using the BLINCYTOTM

technology, RFS, time of hematological 

relapse, OS rates, and the proportion of 

patients eligible for alloHSCT who 

underwent the procedure after receiving 

treatment using the BLINCYTOTM

technology. An analysis of data from the 

pivotal trial showed that 40 percent of 

patients treated with the BLINCYTOTM

technology who achieved CR or CRh 

were able to proceed to alloHSCT. A 

secondary analysis from the pivotal 

study found that in patients who 

achieved CR or CRh and had a minimal 

residual disease assessment during the 

first 2 cycles, the MRD response rate 

(little or no evidence of disease even at 

the molecular level) was 82.2 percent. 

The applicant asserted that this finding 

is significant because MRD is often a 

harbinger of relapse and a poor 

prognostic factor for patients diagnosed 

with ALL. 

We are concerned that the data 

provided from the clinical studies are 

not sufficient to demonstrate that the 

BLINCYTOTM technology meets the 

substantial clinical improvement 

criterion. For example, the 

BLINCYTOTM study MT 103–211 was 


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not randomized or blinded, and was 

comprised of a small sample group of 

189 patients with a median age of 39 

years. We are concerned that the sample 

group studied during the clinical trial is 

not appropriate to determine if the 

technology represents a substantial 

clinical improvement in treatment 

options available for the Medicare 

patient population. Moreover, we are 

concerned that meaningful conclusions 

cannot be drawn from the results of this 

study because of the lack of a control 

group. 

With regard to the applicant’s 

assertion that the BLINCYTOTM

technology offers a treatment option for 

patients who may be unresponsive to 

currently available treatment modalities, 

the applicant specifically focused on 

how the BLINCYTOTM technology 

represents a treatment option for a 

patient population in which 

chemotherapy has proven to be 

unsuccessful, or for whom intensive 

chemotherapy treatment is not possible 

because of the risks associated with 

exposure to cumulative toxicities. The 

applicant believed that the MBMA, the 

historical comparator study, and the 

BLINCYTOTM study MT 103–211, 

which is a pivotal clinical trial 

sufficiently isolate this patient 

population in order to measure specific 

health care outcomes. We agree with 

this assertion. However, our concerns 

with the isolated patient population are 

that it is comprised of and represents a 

small sample group of patients whose 

age demographic is much younger than 

the age demographic of eligible 

Medicare beneficiaries. 

The applicant also asserted that the 

BLINCYTOTM technology decreases the 

rate of subsequent therapeutic 

interventions for patients who might not 

have otherwise achieved remission. In 

other words, because treatment with the 

BLINCYTOTM technology appears to 

increase the possibility of some patients 

achieving remission, the applicant 

maintained that these patients would 

receive fewer therapeutic interventions 

and become eligible to receive 

alloHSCT. We believe that it is difficult 

to determine what services and 

therapeutic interventions these patients 

would have required if they had not 

achieved remission, and we are not 

convinced that treatment using the 

BLINCYTOTM technology leads to a 

decrease in additional therapeutic 

interventions. We also note that patients 

who successfully achieve remission 

proceed to alloHSCT and, therefore, 

receive a different set of subsequent 

therapeutic interventions. 

With regard to the applicant’s 

assertion that the BLINCYTOTM

technology reduces mortality rates, we 

note that the applicant did not directly 

capture mortality rates as an endpoint in 

the BLINCYTOTM pivotal study (MT 

103–211), although mortality was 

analyzed during the other three studies 

that support the new technology add-on 

payment application. We note that the 

data and the MBMA’s results included 

with the technology’s application used 

an OS odds ratio as a measure of 

mortality, and were developed from 18 

studies published between January 1995 

and December 2012. We are concerned 

that relying on the results of data using 

a measure of mortality that is contingent 

upon studies completed in the 1990s 

presents a limitation in regard to the 

methodology used in the applicant’s 

analysis. Advances in overall oncology 

care over the past 2 decades may 

invalidate the patient population 

represented in these studies as a 

comparison group. Therefore, we find it 

difficult to attribute the reduced 

mortality rate and improved clinical 

outcomes revealed by these studies to 

the efficacy of the BLINCYTOTM

technology. 

We are inviting public comments on 

if, and how, the BLINCYTOTM

technology meets the substantial 

clinical improvement criterion, 

specifically in regard our specified 

concerns. 

c. Ceftazidime Avibactam (AVYCAZ) 

Cerexa, Inc., an affiliate of Actavis, 

Inc., submitted an application for new 

technology add-on payments for FY 

2016 for Ceftazidime Avibactam 

(AVYCAZ). AVYCAZ is used for the 

treatment of adult patients who have 

been diagnosed with complicated 

urinary tract Infections (cUTIs), 

including pyelonephritis and 

complicated Intra-abdominal Infections 

(cIAIs), for which there are limited or no 

available treatment options. Although 

AVYCAZ is indicated for the treatment 

of patients who have been diagnosed 

with cUTIs and cIAIs, the applicant 

asserted that the product may also be 

used in the treatment of patients 

diagnosed with cUTIs and cIAIs caused 

by extended-spectrum b-lactamase 

(ESBL)-producing Gram-negative 

pathogens, carbapenem-resistant 

Enterobacteriaceae (CRE), and 

multidrug-resistant (MDR) 

Pseudomonas aeruginosa. 

AVYCAZ is an intravenous b-lactam/ 

b-lactamase inhibitor combination 

antibacterial drug, consisting of an antipseudomonal, Cephalosporin (also 

referred to as Ceftazidime), and a blactamase inhibitor, Avibactam. 

Ceftazidime is currently available and 

widely used as an extended spectrum of 

Cephalosporin. However, in recent years 

Cephalosporin has had diminishing 

effects because of increasing levels of 

antibiotic resistance in specific bacteria. 

Some species of bacteria produce +- 

lactamase enzymes, which cleave the +- 

lactam in antibiotics such as penicillin 

that have a +-lactam ring in their 

structure. The +-lactamase enzymes 

inactivate the antibiotic and cause the 

bacteria to become resistant to that 

antibiotic. To avoid development of 

resistance, in current practices +- 

lactamase inhibitors are administered in 

combination with +-lactam antibiotics to 

inhibit the action of +-lactamase 

enzymes and prevent the development 

of antibiotic resistance because +- 

lactamase inhibitors block the activity of 

+-lactamase enzymes. This tends to 

widen the spectrum of antibacterial 

activity. For example, a commonly used 

b-lactamase inhibitor, Clavulanic acid or 

Clavulanate, is usually combined with 

Amoxicillin to create Augmentin or 

Ticarcillin (Timentin); Sulbactam (also a 

commonly used +-lactamase inhibitor) 

is usually combined with Ampicillin to 

create Cefoperazone; and Tazobactam is 

usually combined with Piperacillin. 

Ceftazidime is not combined with any 

b-lactamase inhibitors. Combining 

Ceftazidime with Avibactam prohibits 

bacteria from developing resistance to 

the antibiotic and protects Ceftazidime 

from being inactivated by b-lactamase 

enzymes. According to the applicant, 

unlike other inhibitors, Avibactam does 

not induce Class C enzymes that 

diminish the activity of Cephalosporin. 

Administering Ceftazidime in 

combination with Avibactam decreases 

the minimum inhibitory concentration 

(MIC) of Class A and Class C isolates, 

and some Class D isolates, thereby 

restoring the in vitro activity of 

Ceftazidime against these resistant 

isolates. 

AVYCAZ is administered as a 

treatment to patients 18 years of age, or 

older, who have been diagnosed with a 

cUTI and/or a cIAI in doses of 2.5g (2g 

of Ceftazidime and 0.5g of Avibactam), 

every 8 hours by intravenous infusion 

spanning over a 2-hour time period. The 

recommended duration of treatment 

with AVYCAZ for patients diagnosed 

with a cIAI (used in combination with 

Metronidazole) is 5 to 14 days as an 

inpatient. The recommended duration 

of treatment with AVYCAZ for patients 

diagnosed with a cUTI is 7 to 14 days 

as an inpatient. The FDA has authorized 

a randomized multi-center, activecontrolled trial to evaluate the safety 

and tolerability of AVYCAZ in children 

who are at least 3 months of age, and in 

adults 18 years of age or older who have 

been diagnosed with a cUTI and/or cIAI 


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6 Drugs for urinary tract infections. JAMA. 

2014;311(8):855–6. Available at: http://

jama.jamanetwork.com/

article.aspx?articleid=1832532. 

7Solomkin JS et al. Guidelines by the Surgical 

Infection Society and the Infectious Diseases 

Society of America. Clin Infect Dis. 2010;50(2):133– 

64. Available at: http://cid.oxfordjournals.org/

content/50/2/133.full. 

as part of the post-marketing 

surveillance studies. The FDA also 

authorized and recommended a clinical 

trial to study the use of AVYCAZ in the 

treatment of patients who have been 

diagnosed with a cIAI and to generate 

phase 3 data as an effort to evaluate the 

pharmacokinetics, safety, and clinical 

outcomes of adult patients diagnosed 

with baseline renal impairment 

(creatinine clearance of 50 mL/min or 

less) who also are eligible for, or being 

treated with, AVYCAZ—adjusting 

dosage regimens to protect renal 

function. 

With regard to the newness criterion, 

AVYCAZ was approved by the FDA on 

February 25, 2015. As stated earlier in 

section II.G.1.a. of the preamble of this 

proposed rule, for FY 2016, effective 

October 1, 2015 (FY 2016), the ICD–10 

coding system will be implemented. We 

note that the applicant submitted a 

request and presented at the September 

2014 Coordination and Maintenance 

Committee Meeting to apply for ICD– 

10–PCS codes that uniquely identify the 

administration of CeftazidimeAvibactam Anti-infective. More 

information on this request can be 

found on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

Currently, ICD–10–PCS procedure 

codes 3E03329 (Introduction of other 

anti-infective into peripheral vein, 

percutaneous approach) and 3E04329 

(Introduction of other anti-infective into 

central vein, percutaneous approach) 

describe the injection of an antibiotic. 

However, these ICD–10–PCS codes are 

not specific to the type of antibiotic 

used. We received public comments 

during and after the March 2015 ICD– 

10 Coordination and Maintenance 

Committee meeting that supported the 

creation of a unique code to identify the 

AVYCAZ antibiotic when it is used in 

the treatment of patients who have been 

diagnosed with cUTIs and cIAIs. As a 

result, the following ICD–10–PCS codes 

were created under the new Section X 

to describe the specific use of AVYCAZ 

and are effective October 1, 2015 (FY 

2016): XW03321 (Introduction of 

ceftazidime-avibactam anti-infective 

into peripheral vein, percutaneous 

approach, new technology group 1); and 

XW04321 (Introduction of ceftazidimeavibactam anti-infective into central 

vein, percutaneous approach, new 

technology group 1). If the AVYCAZ 

technology is approved for new 

technology add-on payments, we 

believe that the newness period would 

begin on February 25, 2015, the date of 

FDA approval. At this time, the 

applicant has not submitted any 

information that suggests the technology 

was not available on the U.S. market as 

of the FDA approval date. The applicant 

maintained that AVYCAZ meets the 

newness criterion. We are inviting 

public comments on whether AVYCAZ 

meets the newness criterion. 

According to the applicant, the most 

current guidelines recommend 

treatment for patients hospitalized 

because of a cUTI diagnosis using 

antibiotic drugs such as Cefepime, 

Ceftriaxone, and Piperacillin/

Tazobactam.6 For patients who have 

been diagnosed with a cIAI and who are 

advanced in age, the most current 

guidelines recommend treatment using 

antibiotic drugs such as 

Imipenemcilastin, Meropenem, and 

Piperacillin/Tazobactam.7 We are 

concerned that AVYCAZ may be 

substantially similar to other currently 

available treatment options, which also 

are used in the treatment of these types 

of infections. In the FY 2010 IPPS/RY 

2010 LTCH PPS final rule (74 FR 43813 

through 43814), we established criteria 

for evaluating whether a new 

technology is substantially similar to an 

existing technology, specifically: (1) 

Whether a product uses the same or a 

similar mechanism of action to achieve 

a therapeutic outcome; (2) whether a 

product is assigned to the same or a 

different MS–DRG; and (3) whether the 

new use of the technology involves the 

treatment of the same or similar type of 

disease and the same or similar patient 

population. If a technology meets all 

three of these criteria, it would be 

considered substantially similar to an 

existing technology and would not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. 

As stated by the applicant, 

Ceftazidime is currently available and 

widely used in the treatment of these 

types of infections. In addition, the 

current treatment options available to 

Medicare beneficiaries and used to treat 

this patient population include 

antibiotics such as Polymyxins (for 

example, Colistin), Aminoglycosides 

(for example, Amikacin and 

Gentamicin), Carbapenems (for 

example, Meropenem and Imipenem/

Cilastatin), or Tigecycline. The 

applicant maintained that the 

administration of Ceftazidime in 

combination with Avibactam broadens 

the spectrum of +-lactamase inhibition 

when compared to administering 

Ceftazidime without Avibactam and 

other currently available therapies 

because Avibactam has inhibiting agents 

that restore the in vitro activity of 

Ceftazidime that is sometimes decreased 

when encountered by common Class A 

and Class C isolates and some Class D 

isolates. The applicant also asserted that 

the technology may be used to treat 

patients who have been diagnosed with 

cUTIs and/or cIAIs caused by extendedspectrum b-lactamase (ESBL)-producing 

Gram-negative pathogens, Klebsiella 

pneumoniae carbapenemase (KPC), 

carbapenem-resistant Enterobacteriaceae 

(CRE), and multidrug-resistant (MDR) 

Pseudomonas aeruginosa. However, we 

believe that the mechanism of action of 

AVYCAZ is the same as the mechanism 

of action of Ceftazidime because both 

drugs rely upon Cephalosporin to 

achieve a successful therapeutic 

outcome. Further, we are concerned that 

AVYCAZ involves the treatment of the 

same or similar type of disease and the 

same or similar patient population as 

other currently approved treatment 

options. Therefore, we believe that 

AVYCAZ bears a substantial similarity 

to Ceftazidime and other currently 

available treatment options. We are 

inviting public comments regarding 

whether AVYCAZ meets the newness 

criterion, specifically with regard to the 

substantial similarity criteria. For a 

detailed discussion of the criteria for 

substantial similarity, we refer readers 

to the FY 2006 IPPS final rule (70 FR 

47351 through 47352) and the FY 2010 

IPPS/LTCH PPS final rule (74 FR 43813 

through 43814). 

With regard to the cost criterion, the 

applicant maintained that AVYCAZ 

meets the cost criterion. According to 

the applicant, there are 63 ICD–9–CM 

diagnosis codes that describe cUTIs 

and/or cIAIs. Cases representing 

patients who have been diagnosed with 

cUTIs and/or cIAIs may be reported on 

hospital claims using any 1 of 12 

different ICD–9–CM diagnosis codes 

describing cUTIs, and any 1 of 51 ICD– 

9–CM diagnosis codes describing cIAIs. 

Therefore, cases representing patients 

diagnosed with either a cUTI or a cIAI 

may be assigned to multiple MS–DRGs. 

Of the 63 applicable ICD–9–CM 

diagnosis codes, the applicant used 35 

ICD–9–CM codes to identify 2,482,157 

cases from the FY 2013 MedPAR file, 

which mapped to 567 MS–DRGs. The 

top five MS–DRGs containing cases that 

may be eligible for AVYCAZ are: MS– 

DRG 689 (Kidney and Urinary Tract 

Infections with MCC); MS–DRG 690 

(Kidney and Urinary Tract Infections 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24436 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

8Antibiotics. Merck Manual. Available at: 

http://www.merckmanuals.com/home/infections/

antibiotics.html. 

9The AMR database is a U.S. hospital inpatient 

database that provides updated information every 6 

months. AMR gathers data from approximately 300 

hospitals per year, providing information from 

approximately 22,000 patient records. Pharmacists 

from these hospitals fill out an inpatient profile 

form by verbatim transcription of information from 

patient charts, such as patient demographics, 

surgery codes, antibiotics used, dosage, start and 

end dates for each antibiotic used, and specialty 

information. These inpatient profile forms are then 

submitted to AMR in paper format. Data from this 

sampling of hospitals is projected to the universe 

of US hospitals. Available at: http://www.amrdata.com/. 

10Centers for Medicare and Medicaid Services. 

Market Basket Data. Available at: http://

www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/

MedicareProgramRatesStats/

MarketBasketData.html. 

without MCC); MS–DRG 871 

(Septicemia or Severe Sepsis Without 

Mechanical Ventilation 96+ Hours With 

MCC); MS–DRG 872 (Septicemia or 

Severe Sepsis Without Mechanical 

Ventilation 96+ Hours Without MCC); 

and MS–DRG 945 (Rehabilitation with 

CC/MCC). The top five MS–DRGs 

represent approximately 30 percent of 

the cases identified (731,560 cases out 

of 2,482,157 total cases), reported using 

1 of the 35 respective ICD–9–CM 

diagnosis codes. To demonstrate that 

AVYCAZ met the cost criterion, the 

applicant provided multiple analyses 

for both cUTI and cIAI cases using 100 

percent or 80 percent of all of the cases, 

as well as analyses of subset cases 

treated with low-cost generic drugs and 

high-cost brand named drugs 

administered for a length of 5 and 8 

days. 

The applicant began its analysis by 

searching the FY 2013 MedPAR file and 

identifying 2,183,467 cases representing 

patients diagnosed with a cUTI across 

544 MS–DRGs, and 298,690 cases 

representing patients diagnosed with a 

cIAI across 385 MS–DRGs. This resulted 

in the identification of 1,146,971 cases 

representing patients diagnosed with a 

cUTI across 205 MS–DRGs, and 39,080 

cases representing patients diagnosed 

with a cIAI across 32 MS–DRGs. After 

searching the FY 2013 IPPS Impact File, 

the applicant focused its analysis on 

1,067,111 cases representing patients 

diagnosed with a cUTI across 193 MS– 

DRGs and 36,181 cases representing 

patients diagnosed with a cIAI across 31 

MS–DRGs. The applicant further 

modified a portion of its analysis to 

focus on 1,067,072 cases representing 

patients diagnosed with a cUTI across 

192 MS–DRGs in accordance with the 

thresholds obtained from Table 10 of the 

FY 2015 IPPS/LTCH PPS final rule. 

Based on these data, for this analysis, 

the applicant used 100 percent of all of 

the cases representing patients 

diagnosed with a cUTI (1,067,072 cases) 

across 192 MS–DRGs. The applicant 

determined an average case-weighted 

standardized charge per case of $42,736. 

The applicant then excluded the charges 

for the specific technology used from 

the average case-weighted standardized 

charge per case. To continue its 

analysis, the applicant used two 

different variables to exclude the 

charges for specific technologies used, 

that is, the charges for low-cost generic 

drugs and the charges for high-cost 

brand named drugs administered for a 

length of 5 and 8 treatment days. The 

applicant explained that, at a minimum, 

it is recommended that antibiotics be 

administered for at least 5 days to 

prevent the development of antibioticresistant bacteria.8 The applicant noted 

that, according to the Arlington Medical 

Resources (AMR),9 the average length of 

therapy for patients diagnosed with an 

UTI and/or an IAI who were 

successfully treated for less than 5 days 

only represents 0.28 percent of all cases 

representing these types of conditions. 

Therefore, a 5-day treatment regimen 

was selected as a basis to represent the 

most conservative approach. In 

addition, the AMR’s database indicated 

that the average length of therapy for 

patients diagnosed with an UTI who 

were successfully treated was 8.3 days 

and, therefore, the applicant selected a 

8-day treatment regimen as a basis to 

represent a more liberal approach. The 

applicant also used data from the AMR 

to determine which drugs are the most 

commonly purchased injectable 

antibiotics. The applicant estimated a 

total charge of $441.75 for low-cost 

generic drugs and charges related to the 

infusion of these drugs for a 5-day 

treatment regimen, and $706.80 for a 8- 

day treatment regimen. The applicant 

estimated a total charge of $1,535.95 for 

high-cost brand named drugs and 

charges related to the infusion of these 

drugs for a 5-day treatment regimen, and 

$2,397.58 for an 8-day treatment 

regimen. The applicant then 

standardized and inflated the charges 

using a factor of 7.13 percent using the 

Medicare Economic Index from the 

latest CMS Market Basket Data file.10

The applicant then added the charges 

for AVYCAZ and the infusion of 

AVYCAZ based on a 5-day treatment 

regimen and an 8-day treatment 

regimen. Depending on the amount of 

charges excluded for the use of specific 

drugs and the charges related to the 

infusion of these drugs, the applicant 

determined a final inflated average caseweighted standardized charge per case 

that ranged from $42,469 to $46,842. 

Using the FY 2015 IPPS Table 10, the 

average case-weighted threshold amount 

for all of the MS–DRGs used is $40,303 

(all calculations above were performed 

using unrounded numbers). Because the 

final inflated average case-weighted 

standardized charge per case under all 

of these scenarios exceeds the average 

case-weighted threshold amount, the 

applicant maintained that AVYCAZ 

meets the cost criterion under this 

analysis. 

The applicant conducted another 

analysis using the 80-percent variable 

for 846,897 cases representing patients 

diagnosed with a cUTI and/or a cIAI 

based on 3 of the ICD–9–CM diagnosis 

codes identified across 15 MS–DRGs. 

Depending on the amount of the charges 

excluded for the cost of the specific 

drugs and the charges related to the 

infusion of these drugs, the applicant 

determined a final inflated average caseweighted standardized charge per case 

that ranged from $37,086 to $41,459. 

Using the FY 2015 IPPS Table 10, the 

average case-weighted threshold amount 

across the 15 MS–DRGs used is $36,411 

(all calculations above were performed 

using unrounded numbers). Because the 

final inflated average case-weighted 

standardized charge per case under all 

of these scenarios exceeds the average 

case-weighted threshold amount, the 

applicant maintained that AVYCAZ also 

meets the cost criterion under this 

analysis. 

The applicant conducted another 

analysis using 100 percent of all of the 

cases representing patients who have 

been diagnosed with a cIAI (36,181 

cases) across 31 MS–DRGs, and 

determined an average case-weighted 

standardized charge per case of 

$51,436.98. The applicant then 

excluded the charges for the specific 

technology used from the average caseweighted standardized charge per case. 

To continue its analysis, the applicant 

used two different variables to exclude 

the charges for the specific technologies 

used; that is, the charges for low-cost 

generic drugs and the charges for highcost brand named drugs administered 

for a length of 5 and 8 treatment days. 

The applicant explained that, at a 

minimum, it is recommended that 

antibiotics be administered for at least 5 

days to prevent the development of 

antibiotic-resistant bacteria. The 

applicant also noted that, according to 

the AMR, the average length of therapy 

for patients diagnosed with an UTI and/ 

or an IAI that was successfully treated 

in less than 5 days only represents 0.28 

percent of all cases representing these 

types of conditions. Therefore, a 5-day 

treatment regimen was selected as a 

basis to represent the most conservative 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24437 

11Tracking CRE—Carbapenempase producing 

CRE in the US. CDC HAI Web site. Available at: 

http://www.cdc.gov/hai/organisms/cre/

TrackingCRE.html. 

12Making health care safer—Stop infections from 

lethal CRE germs now. CDC Vital Signs 2013. 

Available at: http://www.cdc.gov/vitalsigns/pdf/

2013-03-vitalsigns.pdf. 

13Antobiotics. Merck Manual. Available at: 

http://www.merckmanuals.com/home/infections/

antibiotics.html. 

14Bader M, Hawboldt J, Brooks A. Management 

of complicated urinary tract infections in the era of 

antimicrobial resistance. Postgraduate 

Medicine.2010; 122(6):7–15. 

Rishi H, Dhillon P, Clark C. ESBLs: a clear and 

present danger? Critical Care Research and 

Practice, 2012; Article ID 625170. 

Jacoby GA, Munoz-Price LS. The New bLactamases.N Engl J Med 2005; 352:380–391. 

15Pooled data includes subset of patients from 

Phase II trials and interim data from the Phase III 

REPRISE trial. 

16http://medicaldictionary.thefreedictionary.com/test+of+cure. 

17 Data on File. Actavis 2014. 

approach. In addition, the AMR’s 

database indicated that the length of 

therapy for patients diagnosed with an 

IAI was 11.2 days and, therefore, the 

applicant selected a 8-day regimen as a 

basis to represent a more liberal 

approach. The applicant then added 

charges for AVYCAZ and the infusion of 

AVYCAZ based on a 5-day or 8-day 

treatment regimen. Depending on the 

amount of the charges excluded for the 

specific drugs used and the charges 

related to the infusion of these drugs, 

the applicant determined a final inflated 

average case-weighted standardized 

charge per case that ranged from 

$58,565 to $62,937. Using the FY 2015 

IPPS Table 10 thresholds, the average 

case-weighted threshold amount across 

all of the MS–DRGs used is $51,436 (all 

calculations above were performed 

using unrounded numbers). Because the 

final inflated average case-weighted 

standardized charge per case under all 

of these scenarios exceeds the average 

case-weighted threshold amount, the 

applicant maintained that AVYCAZ also 

meets the cost criterion under this 

analysis. 

The applicant conducted another 

analysis using the 80-percent variable 

for 28,483 cases representing patients 

diagnosed with a cIAI based on 5 of the 

ICD–9–CM diagnosis codes identified 

across 4 MS–DRGs. Depending on the 

amount of the charges excluded for the 

specific drugs used and the charges 

related to the infusion of these drugs, 

the applicant determined a final inflated 

average case-weighted standardized 

charge per case that ranged from 

$50,435.54 to $54,809.30. Using the FY 

2015 IPPS Table 10 thresholds, the 

average case-weighted threshold amount 

across all of the MS–DRGs used is 

$47,186 (all calculations above were 

performed using unrounded numbers). 

Because the final inflated average caseweighted standardized charge per case 

under all of these scenarios exceeds the 

average case-weighted threshold 

amount, the applicant maintained that 

AVYCAZ also meets the cost criterion 

under this analysis. 

We are concerned that the applicant 

did not use the inflation factor of 

10.4427 when calculating the average 

case-weighted standardized charge per 

case, which is the same inflation factor 

used by CMS to update the FY 2015 

outlier threshold, and did not offer a 

rationale for its alternative inflation 

factor. We are inviting public comments 

on whether AVYCAZ meets the cost 

criterion, specifically with regard to our 

concerns. 

The applicant maintained that 

AVYCAZ represents a substantial 

clinical improvement in the available 

treatment options for patients diagnosed 

with a cIAI and/or a cUTI, including 

cUTIs and cIAIs that are known or 

suspected to be caused by extendedspectrum b-lactamase (ESBL)-producing 

Gram-negative pathogens, carbapenemresistant Enterobacteriaceae (CRE), and 

multidrug-resistant (MDR) 

Pseudomonas aeruginosa. According to 

the applicant, existing treatment options 

for these types of conditions are very 

limited and pose toxicity risks. The 

applicant stated that antibiotic-resistant 

infections are a serious problem for 

health care providers and patients. 

Among the bacteria resistant to all or 

nearly all of the antibiotics available 

today, CRE has developed rapidly and 

continues to proliferate. The applicant 

noted that, as of 2014, 49 States have 

reported confirmed CRE infections, an 

increase from 42 States that reported 

and confirmed CRE infections in 

2013.11,12 Almost half of hospital 

patients who get bloodstream infections 

from CRE bacteria die from the 

infection.13 The applicant further noted 

that, over the last 20 years, Gramnegative bacteria have evolved in 

defense against recently approved 

broad-spectrum b-lactam agents (for 

example, +-lactam +-lactamase 

inhibitors [BL–BLIs] and carbapenems) 

by producing a multitude of ‘‘new’’ blactamases—including extendedspectrum b-lactamases (ESBLs) and 

carbapenemases that can confer 

resistance to these front-line agents. 

Because of the technology’s inhibiting 

activity against these pathogens, the 

applicant maintained that AVYCAZ 

may provide a safer and more effective 

treatment option for patients diagnosed 

with cIAIs and cUTIs caused by these 

antibiotic-resistant organisms. The 

applicant further noted that there are 

serious side effects associated with the 

current treatment options and regimens, 

such as Polymyxins, Colistin, 

Aminoglycosides, Carbapenems, and 

Tigecycline,14 including resistance to 

nephrotoxicity. 

The applicant provided data from the 

REPRISE study, which compared 

AVYCAZ and Carbapenem, also used as 

a treatment option for patients 

diagnosed with cIAIs and cUTIs. This 

study was specifically designed to 

demonstrate the inhibiting activity of 

Avibactam to restore the clinical and 

microbiological efficacy of Ceftazidime 

verses Ceftazidime-resistant, blactamase-producing Gram-negative 

bacteria. According to the applicant, in 

the pooled cIAI and cUTI studies,15 the 

by-pathogen microbiological response 

rate was assessed using the test of cure 

(TOC) as a measuring tool. TOC refers 

to the reculturing of a site of initial 

infection to determine whether the 

patient is cured.16 TOC was the same or 

numerically higher for AVYCAZ versus 

the comparator for almost all pathogens 

isolated for the treatment of ceftazidimenonsusceptible (CAZ–NS). We are 

concerned that the results of this study 

do not show that AVYCAZ has more 

favorable clinical or microbiological 

responses when compared to existing 

technologies. According to 

§ 412.87(b)(1) of our regulations, in 

order to satisfy the substantial clinical 

improvement criterion, the applicant 

must demonstrate that the technology 

represents an advance that substantially 

improves, relative to technologies 

previously available, the diagnosis or 

treatment of Medicare beneficiaries. 

The applicant reported that the 

INFORM study 17 is one of the ongoing 

in vitro studies of AVYCAZ. According 

to the results of this study, Avibactam 

extends the activity of Ceftazidime and 

provides a broad spectrum of activity 

compared to currently available 

therapies. In addition, AVYCAZ 

demonstrated activity against two of the 

four areas of need as stated by the CDC, 

and potentially demonstrated activity 

against a third. The two areas of need 

that demonstrated favorable 

microbiological response were 

carbapenem-resistant Enterobacteriaceae 

(CRE) and extended-spectrum blactamase (ESBL). We are concerned 

that in vitro studies may not necessarily 

correlate with clinical results. 

The applicant also provided 

conclusions and data from one of the 

Phase II clinical trials conducted for 

patients diagnosed with cIAIs and 

cUTIs, respectively. The applicant 

reported that the patients diagnosed 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24438 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

with cIAIs were randomized to either 

AVYCAZ with Metronidazole versus the 

control drug Meropenem. The clinical 

cure rates at TOC were 82.4 percent for 

the AVYCAZ + Metronidazole group, 

and 88.8 percent for the Meropenem 

group for patients diagnosed with cIAIs. 

For patients diagnosed with cUTIs, the 

applicant reported that they were 

randomized to either AVYCAZ versus 

Imipenem. The clinical cure rates at 

TOC were 80.4 percent versus 73.5 

percent for the AVYCAZ group versus 

the Imipenem group for patients 

diagnosed with cUTIs. 

The applicant also provided data from 

the RECLAIM–1 and RECLAIM–2 trials. 

The applicant reported that these trials 

evaluated the safety and efficacy of 

AVYCAZ versus the control drug used 

to treat patients hospitalized for cIAIs. 

According to the applicant, AVYCAZ 

technology met the objective of 

statistical noninferiority when 

compared to the control drug. However, 

the applicant asserted, in a subgroup of 

patients diagnosed with moderate renal 

impairment at baseline (MRIB [defined 

as an estimated creatinine clearance 

(ClCr) of >30 mL/min and ≤50 mL/

min]), AVYCAZ combined with 

Metronidazole had lower clinical cure 

rates when compared to the control 

group. In addition to the clinical 

response rate findings, although the 

number of deaths was minimal, they 

were numerically higher for patients 

diagnosed with MRIB who were treated 

with AVYCAZ in combination with 

Metronidazole when compared to 

patients treated with Meropenem. The 

applicant acknowledged that this result 

was not more favorable and reviewed 

the individual cases of failure or 

indeterminate (including all deaths) for 

the patients diagnosed with MRIB, and 

identified no predominant reason for 

the treatment difference observed in the 

subgroup analysis. However, the 

applicant maintained that AVYCAZ 

represents a substantial clinical 

improvement because of the adverse 

effects of other currently available 

treatment options such as 

nephrotoxicity. We are concerned that 

the findings cited by the applicant lack 

data regarding the adverse effects of 

nephrotoxicity because of treatment 

using other currently available 

treatment options. 

The applicant stated that, in the Phase 

II trials, the Medicare-eligible 

population represented 9.2 percent of 

the total population of patients 

diagnosed with cIAIs, and 14.8 percent 

of the total population of patients 

diagnosed with cUTIs. We are 

concerned that a cohort that would 

reflect a Medicare population was not 

analyzed or predefined as a subgroup in 

the trials to better understand and 

quantify the substantial clinical 

improvement of AVYCAZ. Furthermore, 

we are unsure whether a possibility of 

a favorable safety and tolerability profile 

for AVYCAZ relative to other currently 

available treatment options for patients 

diagnosed with cUTIs and cIAIs implies 

a substantial clinical improvement. 

The applicant maintained that 

AVYCAZ represents a substantial 

clinical improvement over treatment 

options currently available to Medicare 

beneficiaries. We do not believe that the 

applicant has substantiated this 

assertion. With regard to the data 

indicating the safety of the technology, 

we are concerned that the results for the 

trials could be interpreted to suggest 

that use of the technology may lead to 

increased mortality. We note that the 

composition of the treatment and 

control groups may make it difficult to 

isolate the degree to which AVYCAZ 

affects safety and health care outcomes 

because the patients in the treatment 

group were also treated with another 

drug administered in combination with 

AVYCAZ. Moreover, we are concerned 

that the median age of the participants 

enrolled in the studies of AVYCAZ was 

between 40 and 50 years. We believe 

that it would be indicative to use a 

subgroup that actually represents the 

eligible Medicare population (that is, 

patients who are 65 years of age or 

older, blind, disabled, or diagnosed with 

end-stage renal disease). The applicant 

stated that AVYCAZ had greater efficacy 

and safety measures for patients who 

have limited or no other available 

treatment options. However, we are 

concerned that the patient population 

enrolled in the applicant’s trials were 

not eligible Medicare beneficiaries, nor 

was it definitive that these participants 

had limited or no other available 

treatment options. We are inviting 

public comments on whether AVYCAZ 

meets the substantial clinical 

improvement criterion, specifically with 

regard to our stated concerns. 

We did not receive any written public 

comments in response to the New 

Technology Town Hall meeting 

regarding the application of AVYCAZ 

for new technology add-on payments. 

d. DIAMONDBACK 360® Coronary 

Orbital Atherectomy System 

Cardiovascular Systems, Inc. 

submitted an application for new 

technology add-on payments for the 

DIAMONDBACK 360® Coronary Orbital 

Atherectomy System (OAS) 

(DIAMONDBACK® Coronary OAS) for 

FY 2016. The DIAMONDBACK®

Coronary OAS is a percutaneous orbital 

atherectomy system used to facilitate 

stent delivery in patients who have been 

diagnosed with coronary artery disease 

and severely calcified coronary artery 

lesions. The system uses an electrically 

driven, diamond-coated crown to 

reduce calcified lesions in coronary 

blood vessels. The components of the 

DIAMONDBACK® Coronary OAS are: 

(1) The DIAMONBACK 360® Coronary 

Orbital Atherectomy Device (OAD); (2) 

the VIPERWIRE Advance Coronary 

Guide Wire; (3) the VIPERSLIDE 

Lubricant; and (4) the Orbital 

Atherectomy System Pump. The 

DIAMONBACK 360® OAD is designed 

to track exclusively over the 

VIPERWIRE, which, in turn, uses the 

VIPERSLIDE Lubricant to reduce the 

friction between the drive shaft of the 

DIAMONBACK 360® OAD and the 

VIPERWIRE. The Orbital Atherectomy 

System Pump provides the saline 

pumping mechanism and power to the 

DIAMONBACK 360® OAD. All 

DIAMONDBACK® Coronary OAS 

devices are single use and provide 

sterile application, except for the pump. 

With respect to the newness criterion, 

the DIAMONDBACK® Coronary OAS 

received FDA pre-market approval as a 

Class III device on October 21, 2013. As 

stated in section II.G.1.a. of the 

preamble of this proposed rule, effective 

October 1, 2015 (FY 2016), the ICD–10 

coding system will be implemented. We 

note that the applicant submitted a 

request for a unique ICD–10–PCS code 

that was presented at the March 18, 

2015 ICD–10 Coordination and 

Maintenance Committee meeting. If 

approved, the code(s) will be effective 

on October 1, 2015 (FY 2016). More 

information on this request can be 

found on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

According to the applicant, the 

DIAMONDBACK® Coronary OAS is the 

only atherectomy device that uses 

centrifugal force and orbital motion and, 

therefore, is not represented by the 

rotational, directional, or laser 

atherectomy device categories (as 

exemplified by Boston Scientific’s 

Rotablator system, the SilverHawk/

Covidient devices, and the Spectranetics 

ELCA Coronary Laser, respectively). In 

addition, the applicant asserted that the 

DIAMONDBACK® Coronary OAS is the 

first and only device approved for use 

in the United States as a treatment for 

patients who have been diagnosed with 

severely calcified coronary artery 

lesions to facilitate stent delivery and 

optimal deployment. Therefore, the 

applicant believed that the 


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DIAMONDBACK® Coronary OAS meets 

the newness criterion. 

We are concerned that, in addition to 

patients who have been diagnosed with 

severely calcified coronary artery 

lesions, the applicant also indicated that 

the DIAMONDBACK® Coronary OAS 

may be used in the treatment of patients 

who do not have severely calcified 

coronary artery lesions (for example, 

patients for whom the degree of 

calcification may not be severe) and that 

this technology may be substantially 

similar to the rotational, directional, and 

laser atherectomy devices that are 

already on the U.S. market for the 

treatment of such patients. In the FY 

2010 IPPS/RY 2010 LTCH PPS final rule 

(74 FR 43813 through 43814), we 

established criteria for evaluating 

whether a new technology is 

substantially similar to an existing 

technology, specifically: (1) Whether a 

product uses the same or a similar 

mechanism of action to achieve a 

therapeutic outcome; (2) whether a 

product is assigned to the same or a 

different MS–DRG; and (3) whether the 

new use of the technology involves the 

treatment of the same or similar type of 

disease and the same or similar patient 

population. If a technology meets all 

three of these criteria, it would be 

considered substantially similar to an 

existing technology and would not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. 

With respect to the first criterion, the 

applicant maintained that the 

technology uses a differential sanding 

mechanism of action to remove plaque 

while potentially minimizing damage to 

the medial layer of the vessel. 

According to the applicant, this 

mechanism of action is the only one 

among atherectomy devices to use 

centrifugal force and orbital motion and, 

therefore, is not represented by the 

rotational, directional, or laser 

atherectomy device categories. We are 

concerned that the applicant did not 

include with their application data to 

show the effectiveness of the orbital 

mechanism of the DIAMONDBACK®

Coronary OAS compared to the 

effectiveness of the rotational, 

directional, and laser mechanisms of 

similar devices used in treating patients 

with calcified coronary artery lesions. 

Therefore, we cannot determine if the 

device’s mechanism of action is unique 

among atherectomy devices as the 

applicant claimed. 

With respect to the second criterion, 

the applicant determined that coronary 

atherectomy cases for which the 

DIAMONDBACK® Coronary OAS 

technology would be appropriate are 

assigned to MS–DRG 246 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent with MCC or 4+ Vessels/ 

Stents); MS–DRG 247 (Percutaneous 

Cardiovascular Procedure with DrugEluting Stent without MCC); MS–DRG 

248 (Percutaneous Cardiovascular 

Procedure with Non-Drug-Eluting Stent 

with MCC or 4+ Vessels/Stents); MS– 

DRG 249 (Percutaneous Cardiovascular 

Procedure with Non-Drug-Eluting Stent 

without MCC); MS–DRG 250 

(Percutaneous Cardiovascular Procedure 

without Coronary Artery Stent with 

MCC), and MS–DRG 251 (Percutaneous 

Cardiovascular Procedure without 

Coronary Artery Stent without MCC). 

We are concerned that potential cases 

involving the DIAMONDBACK®

Coronary OAS would be assigned to the 

same MS–DRGs as other cases that use 

atherectomy devices currently available 

on the U.S. market. 

With respect to the third criterion, the 

applicant maintained that the 

DIAMONDBACK® Coronary OAS is the 

first and only device approved for use 

in the United States as a treatment for 

severely calcified coronary lesions. 

According to the applicant, advances in 

current stent technology have allowed 

most patients with coronary lesions to 

be treated effectively with relatively 

favorable long-term outcomes. However, 

there remain subsets of the patient 

population that are still challenging to 

treat, including patients with severe 

coronary calcification. According to the 

applicant, the DIAMONDBACK®

Coronary OAS is the only atherectomy 

device currently available to treat this 

patient population because it is the first 

and only device approved for use in the 

United States for severely calcified 

coronary lesions. However, we are 

concerned that other devices currently 

available on the U.S. market may not 

necessarily be contraindicated for use in 

treating patients with severe coronary 

calcification. Specifically, we are not 

sure if patients with less than severe 

coronary calcification could be 

appropriately treated using the 

DIAMONDBACK® Coronary OAS or 

other atherectomy devices currently 

available on the U.S. market in order to 

determine if the DIAMONDBACK®

Coronary OAS treats a different patient 

population as the applicant claimed. 

We are inviting public comments on 

if, and how, the DIAMONDBACK®

Coronary OAS meets the newness 

criterion. In our subsequent discussion 

of the cost and substantial clinical 

improvement criteria, we limit our 

analysis of the new technology device to 

a patient population who has severely 

calcified coronary lesions for which the 

other devices are contraindicated for 

use. 

With respect to the cost criterion, the 

applicant determined that cases 

representing patients who have been 

treated with transluminal coronary 

atherectomy for which the 

DIAMONDBACK® Coronary OAS 

technology is appropriate map to MS– 

DRGs 246 through 251 as noted earlier 

in this section. The applicant searched 

the claims data in the FY 2013 MedPAR 

file for cases assigned to these six MS– 

DRGs (which contained claims for 

inpatient hospital discharges from 

October 1, 2012 to September 30, 2013) 

and identified 5,443 claims for cases 

reporting ICD–9–CM procedure code 

17.55. The applicant indicated that it 

further examined the claims data for the 

cases that also reported ICD–9–CM 

diagnosis code 414.4, and identified 250 

claims for cases with a diagnosis of 

calcified coronary lesion. The applicant 

stated that it applied the standard trims 

used by CMS when selecting cases for 

IPPS rate calibration. Therefore, it 

included cases from IPPS hospitals, 

including hospitals located in 

Maryland, and excluded cases paid by 

Medicare Advantage plans, statistical 

outlier cases, and cases from hospitals 

that did not submit charges in a 

sufficiently broad range of revenue 

centers. 

The applicant reported that it 

conducted 16 sensitivity analyses based 

on four areas of uncertainty: Whether to 

include all coronary atherectomy cases 

in the analysis or only those cases that 

reported calcified coronary artery 

lesions; whether to consider a lower 

value or higher value as the acquisition 

cost of a typical atherectomy catheter; 

whether to use the full cost of the 

DIAMONDBACK® Coronary OAS 

catheter and materials or only the cost 

of the catheter alone; and whether to 

include or exclude a factor to inflate 

costs to FY 2015 costs. Based on the 

result of the sensitivity analyses with all 

16 combinations of the values that the 

applicant performed, the applicant 

reported that it determined that the 

average case-weighted standardized 

charge per case for the 

DIAMONDBACK® Coronary OAS would 

exceed the average case-weighted 

threshold amounts for MS–DRGs 246 

through 251 in Table 10 of the FY 2015 

IPPS/LTCH PPS final rule. According to 

the applicant, the average case-weighted 

standardized charge per case using the 

DIAMONDBACK® Coronary OAS 

device exceeds the average caseweighted threshold amounts for MS– 

DRGs 246 through 251 in Table 10 by 

between approximately $6,000 to 

$15,000, depending on the results 

determined by using the combination of 


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24440 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

values of the four areas of uncertainty. 

As described below, the applicant 

believed that using the scenario that 

produced the lowest difference between 

the average case-weighted standardized 

charge per case determined by the 

applicant’s analyses and the average 

case-weighted threshold amounts for 

MS–DRGs 246 through 251 from Table 

10 in the FY 2015 IPPS/LTCH PPS final 

rule still exceeded the Table 10 

threshold amounts by $5,803. 

Using the scenario that produced the 

lowest difference between the average 

case-weighted standardized charge per 

case determined by the applicant and 

the average case-weighted threshold 

amount in the FY 2015 IPPS/LTCH PPS 

final rule Table 10, the applicant 

included all cases reporting coronary 

atherectomy (specifically, the 5,443 

cases reported with ICD–9–CM 

procedure code 17.55) in this analysis. 

The applicant removed the costs of the 

other specific technologies used during 

these procedures; that is, the applicant 

removed the higher of the two standard 

catheter costs, and added the full cost of 

the DIAMONDBACK® Coronary OAS 

catheter alone. To estimate the cost for 

the new technology, the applicant 

divided the projected cost per patient by 

the national average CCR for supplies 

(0.292) included in the FY 2015 IPPS/ 

LTCH PPS final rule. This resulted in an 

average case-weighted average 

standardized charge per case of $86,080. 

The applicant stated that it did not 

apply an inflation factor to convert the 

FY 2013 costs to FY 2015 costs for this 

analysis. However, in other analyses, 

the applicant used the 2-year inflation 

factor of 10.44 percent taken from the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 50379), which was the final inflation 

factor used in the CMS outlier threshold 

calculation for the applicable fiscal year. 

The applicant then determined that its 

average case-weighted standardized 

charge per case exceeded the average 

case-weighted threshold amounts for 

MS–DRGs 246 through 251 in Table 10 

of the FY 2015 IPPS/LTCH PPS final 

rule by $5,803. The applicant 

maintained that all of the results of the 

analyses using this methodology that 

were included in its application 

likewise exceeded the Table 10 

threshold amounts for these MS–DRGs 

and, therefore, demonstrated that the 

DIAMONDBACK® Coronary OAS meets 

the cost criterion. 

Using the scenario that produced the 

lowest difference between its average 

case-weighted standardized charge per 

case and the average case-weighted 

threshold amounts for MS–DRGs 246 

through 251 from the FY 2015 Table 10 

for the analysis of the subgroup of cases 

representing patients who have severely 

calcified coronary artery lesions, the 

applicant reported that it included all of 

the cases that report coronary 

atherectomy that also reported diagnosis 

of calcified coronary lesions (250 cases 

reporting ICD–9–CM procedure code 

414.4). As in the previous scenario, the 

applicant removed costs of the other 

specific technologies used during these 

other procedures; that is, the applicant 

removed the higher of the two standard 

catheter costs, and added the full cost of 

the DIAMONDBACK® Coronary OAS 

catheter alone. To estimate the costs for 

the new technology, the applicant 

divided the projected cost per patient by 

the national average CCR for supplies 

(0.292) in the FY 2015 IPPS/LTCH PPS 

final rule. This resulted in an average 

case-weighted standardized charge per 

case of $86,779. The applicant did not 

apply an inflation factor to convert the 

FY 2013 costs to FY 2015 costs for this 

analysis. The applicant then determined 

that the average case-weighted 

standardized charge per case exceeded 

the FY 2015 Table 10 threshold amount 

of $80,807 by $5,972. The applicant 

maintained that all of the results of the 

analyses using this methodology that 

were included in its application 

likewise exceeded the Table 10 

threshold amounts for these MS–DRGs 

and, therefore, demonstrated that the 

DIAMONDBACK® Coronary OAS meets 

the cost criterion. 

We question some of the assumptions 

underlying the four areas of uncertainty 

that were the basis for the applicant’s 

sensitivity analyses. We would like to 

know the basis of the higher value that 

the applicant considered to be a 

possible acquisition cost of a typical 

atherectomy catheter. We also are 

concerned that the applicant did not 

provide a basis for determining the two 

values it used to remove the costs 

associated with the other specific 

technologies that may have been used 

during the cases included in the 

analysis. We are inviting public 

comments on if, and how, the 

DIAMONDBACK® Coronary OAS meets 

the cost criterion. 

The applicant maintained that the 

DIAMONDBACK® Coronary OAS offers 

a treatment option for a patient 

population that has been diagnosed 

with severely calcified coronary arteries 

that are ineligible for currently available 

treatments and results in improved 

clinical outcomes for patients who have 

been diagnosed with complex coronary 

artery disease related to severely 

calcified coronary arteries. The 

applicant also stated that the 

DIAMONDBACK® Coronary OAS 

device significantly improves clinical 

outcomes for this patient population 

when compared to currently available 

treatment options, including reduced 

mortality, a reduced rate of devicerelated complications, a decreased rate 

of subsequent diagnostic or therapeutic 

interventions (for example, due to 

reduced rate of recurrence of the disease 

process), a decreased number of future 

hospitalizations or physician visits, 

more rapid beneficial resolution of the 

disease process treatment because of the 

use of the device, decreased pain, 

bleeding, or other quantifiable 

symptoms, and reduced recovery time. 

The applicant included data from its 

ORBIT II study to demonstrate that the 

technology represents substantial 

clinical improvement over currently 

available treatment options, including 

improvement in mortality rates, major 

adverse cardiac event (MACE) rates, 

revascularization rates, and cost savings. 

According to the applicant, its ORBIT II 

study was a pivotal clinical study to 

evaluate the safety and effectiveness of 

the DIAMONDBACK® Coronary OAS in 

treating a subset of patients who have 

severely calcified coronary artery 

lesions. The applicant explained that 

the ORBIT II study was a prospective, 

multicenter, non-blinded clinical trial 

that enrolled 443 consecutive patients 

who have been diagnosed with severely 

calcified coronary lesions at 49 U.S. 

sites from May 25, 2010 to November 

26, 2012, in which the 

DIAMONDBACK® Coronary OAS was 

used to prepare patients who had 

severely calcified coronary lesions for 

stent placement. According to the 

applicant, the DIAMONDBACK®

Coronary OAS produced clinical 

outcomes that exceeded its ORBIT II 

study’s two primary safety and efficacy 

endpoints within a patient population. 

The primary safety endpoint was 89.6 

percent freedom from 30-day MACE, 

compared with the performance goal of 

83 percent. The primary efficacy 

endpoint (residual stenosis <50 percent 

post-stent without in-hospital MACE) 

was 88.9 percent, compared with the 

performance goal of 82 percent. The 

applicant stated that, during the trial, 

stent delivery after use of the 

DIAMONDBACK® Coronary OAS 

occurred successfully in 97.7 percent of 

cases with <50 percent residual stenosis 

in 98.6 percent of the patients in the 

study. The applicant further stated that 

low rates of in-hospital Q-wave MI, 

cardiac death, and target vessel 

revascularization also were reported. 

The applicant believed that the results 

of its ORBIT II study met both the 

primary safety and efficacy endpoints 

by significant margins and not only 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24441 

18Mosseri M, Satler LF, Pichard AD, Waksman R. 

Impact of vessel calcification on outcomes after 

coronary stenting. Cardiovasc Revascularization 

Med Mol Interv. 2005;6(4):147–153. 

19Abdel-Wahab M, Richardt G, Joachim Buttner 

H, et al. High-speed rotational atherectomy before 

paclitaxel-eluting stent implantation in complex 

calcified coronary lesions: the randomized 

ROTAXUS (Rotational Atherectomy Prior to Taxus 

Stent Treatment for Complex Native Coronary 

Artery Disease) trial. JACC Cardiovasc Interv. 

2013;6(1):10–19. 

20Clavijo LC, Steinberg DH, Torguson R, et al. 

Sirolimus-eluting stents and calcified coronary 

lesions: clinical outcomes of patients treated with 

and without rotational atherectomy. Catheter 

Cardiovasc Interv Off J Soc Card Angiogr Interv. 

2006;68(6):873–878. 

21Mosseri M, Satler LF, Pichard AD, Waksman R. 

Impact of vessel calcification on outcomes after 

coronary stenting. Cardiovasc Revascularization 

Med Mol Interv. 2005;6(4):147–153. 

22Clavijo LC, Steinberg DH, Torguson R, et al. 

Sirolimus-eluting stents and calcified coronary 

lesions: clinical outcomes of patients treated with 

and without rotational atherectomy. Catheter 

Cardiovasc Interv Off J Soc Card Angiogr Interv. 

2006;68(6):873–878. 

23 Genereux P, Madhavan MV, Mintz GS, et al. 

Ischemic outcomes after coronary intervention of 

calcified vessels in acute coronary syndromes. 

Pooled analysis from the HORIZONS–AMI 

(Harmonizing Outcomes With Revascularization 

and Stents in Acute Myocardial Infarction) and 

ACUITY (Acute Catheterization and Urgent 

Intervention Triage Strategy) TRIALS. J Am Coll 

Cardiol. 2014;63(18):1845–1854. 

24Abdel-Wahab M, Richardt G, Joachim Buttner 

H, et al. High-speed rotational atherectomy before 

paclitaxel-eluting stent implantation in complex 

calcified coronary lesions: the randomized 

ROTAXUS (Rotational Atherectomy Prior to Taxus 

Stent Treatment for Complex Native Coronary 

Artery Disease) trial. JACC Cardiovasc Interv. 

2013;6(1):10–19. 

helped to facilitate stent delivery, but 

also improved both acute care and 30- 

day clinical outcomes compared to 

historical controls. 

The applicant also compared the 

results of its ORBIT II study with 

historical study data that measured the 

performance of other coronary 

atherectomy devices used in the 

treatment of patients who have 

moderate to severely calcified coronary 

lesions. According to the applicant, the 

death and revascularization rates 

reported in the ORBIT II study were 

much lower than those rates reported in 

the literature for patients who had 

severely calcified coronary lesions. For 

example, inpatient cardiac death rates 

were reported on one reported study in 

the literature (Mosseri, et al.) as 1.6 

percent and in another reported study 

(Abdel-Wahab, et al.) as 1.7 percent, 

while another study report (Clavijo, et 

al.) reported death at 30 days as 2.6 

percent and 1.5 percent for RA + DES 

and DES, respectively. 18 19 20 The 

applicant maintained that, compared to 

these historical study data, the data 

results of the ORBIT II study 

demonstrated much lower cardiac death 

rates of 0.2 percent in-hospital and 0.2 

percent at 30 days. The applicant 

further reported that the results of its 

ORBIT II study showed lower mortality 

rates at 9 months and 1 year (3 percent 

and 4.4 percent, respectively) compared 

to previously reported rates (5.0 percent 

and 5.85 percent at 9 months and 6.3 

percent at 1 year). The study report by 

Mosseri, et al. also reported a 1.6 

percent in-hospital target lesion 

revascularization rate (TLR) in a patient 

population with more superficial 

calcification,21 whereas the study report 

by Clavijo, et al. reported a 1.3 percent 

30-day TLR rate for the RA + DES 

group.22 In contrast, the applicant 

reported that the results of the ORBIT II 

study showed a lower TLR rate of 0.7 

percent (both in-hospital and 30-day), 

even though more patients who had 

severely calcified coronary lesions were 

included in the study, and the patients 

were older and had more comorbidities. 

The applicant stated that, at 1-year, the 

results of the ORBIT II study showed a 

higher freedom from TVR/TLR rate (94.1 

percent) compared to previously 

reported rates (81.7 percent to 91.3 

percent), even though patients who had 

more severely calcified coronary lesions 

were included in the ORBIT II study. 

According to the applicant, the MACE 

rate of 16.4 percent indicated in the 

results of the ORBIT II study was lower 

than the rate of the ROTAXUS (24.4 

percent) and ACUITY/HORIZONS (19.9 

percent) trials despite the use of a less 

stringent standard of severe calcification 

in the latter studies.23 24 Further, the 

applicant reported that patients in the 

ORBIT II study experienced a lower rate 

of device-related complications (such as 

dissection, abrupt closure, and 

perforation) compared to rates in the 

historical studies. Overall, the applicant 

asserted that a comparison of data from 

the ORBIT II study and the data from 

historical studies demonstrates that 

patients in the ORBIT II study had more 

severe calcium coronary lesions and 

potentially were more difficult to treat, 

although they experienced better 

outcomes. 

We are concerned that the ORBIT II 

study conducted by the applicant lacked 

a control arm. The applicant asserted 

that although other FDA-approved 

coronary atherectomy products are 

available, none of them are indicated for 

the treatment of patients who have 

severely calcified coronary arteries and, 

therefore, could not be used as a control. 

The applicant believed that it accounted 

for this study limitation by comparing 

the results of the ORBIT II study to 

historical control subjects documented 

in published reports. However, we 

continue to be concerned that 

meaningful conclusions cannot be 

drawn from a study that did not include 

a comparator group. Moreover, we 

question the reliability of comparing 

data from the ORBIT II study to 

historical study data because different 

definitions of severe calcification used 

in each study can make absolute 

comparisons difficult and/or invalid. 

We are inviting public comments on if, 

and how, DIAMONDBACK® Coronary 

OAS meets the substantial clinical 

improvement criterion. 

e. CRESEMBA® (Isavuconazonium) 

Astellas Pharma US, Inc. (Astellas) 

submitted an application for new 

technology add-on payments for 

CRESEMBA® (isavuconazonium) for FY 

2016. CRESEMBA® is an intravenous 

and oral broad-spectrum antifungal used 

for the treatment of adults who have 

severe invasive and life-threatening 

fungal infections, including invasive 

aspergillosis and mucormycosis 

(zygomycosis). 

CRESEMBA® received FDA approval 

on March 6, 2015 and anticipates that 

the market availability on the U.S. 

market will start by the second week of 

April 2015. The FDA indication for the 

use of this product is for the treatment 

of adults who have been diagnosed with 

invasive aspergillosis and 

mucormycosis. Isavuconazonium has 

two formulations: An intravenous (IV) 

solution and an oral capsule. The IV 

formulation of isavuconazonium is 

administered at 200 mg of 

isavuconazole. The oral formulation of 

isavuconazonium is administered at 100 

mg of isavuconazole. Dosing is not 

weight-based. According to the 

applicant, treatment of patients who 

have been diagnosed with these types of 

infection starts with up to 3 days of IV 

therapy in the inpatient hospital setting 

followed by daily oral therapy 

administered for the remainder of the 

inpatient stay and also the duration of 

treatment period, which is 13.4 days. 

As stated in section II.G.1.a. of the 

preamble of this proposed rule, effective 

October 1, 2015 (FY 2016), the ICD–10 

coding system will be implemented. We 

note that the applicant submitted a 

request for unique ICD–10–PCS codes 

that was presented at the March 18, 

2015 ICD–10 Coordination and 

Maintenance Committee meeting. If 

approved, the codes will be effective on 

October 1, 2015 (FY 2016). More 

information on this request can be 

found on the CMS Web site at: http:// 

www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 


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If the technology were to be approved 

for a new technology add-on payment, 

we believe its newness period would 

begin on March 6, 2015, the date of FDA 

approval. At this time, the applicant has 

not submitted any specific information 

to establish that the technology was not 

available on the U.S. market as of the 

FDA approval date or to describe the 

reasons for a delay of availability until 

the second week of April 2015. The 

applicant maintained that CRESEMBA®

meets the newness criterion. 

CRESEMBA® is part of the category of 

drugs known as azole antifungal drugs 

that inhibit the enzyme lanosterol 14 ademethylase. Inhibiting this enzyme 

disrupts the process of converting 

lanosterol to ergosterol and, therefore, 

depletes the level of ergosterol in the 

fungal membrane and inhibits fungal 

growth. Azole antifungal drugs are used 

to treat patients with fungal infections 

such as aspergillosis, and other azole 

antifungal drugs also used for the 

treatment of these patients include 

voriconazole, posaconazole, and 

itroconazole. The CDC Web site at 

http://www.cdc.gov/fungal/diseases/

aspergillosis/treatment.html states that 

voriconazole is used for the treatment of 

patients with invasive aspergillosis, but 

Amphotericin B (Amp B) as well as 

other antifungal drugs can be used if 

patients cannot take voriconazole or the 

infection is not responsive to 

voriconazole. Amphotericin B is the 

first-line of therapy and the only 

FDA-approved treatment of patients 

diagnosed with mucormycosis. 

Amphotericin B binds with ergosterol, a 

component of fungal cell membranes, 

and forms a transmembrane channel 

that leads to membrane leakage, which 

is the primary effect leading to fungal 

cell death. The third class of antifungal 

drugs is echinocandins; examples in 

this group are caspofungin, micafungin, 

and anidulafungin. Echinocandins 

noncompetitively inhibit beta-1, 3-Dglucan synthase enzyme complex in 

susceptible fungi to disturb fungal cell 

glucan synthesis. Beta-glucan 

destruction prevents resistance against 

osmotic forces, which leads to cell lysis 

(http://www.cdc.gov). 

According to the applicant, 

echinocandins are effective against 

aspergillosis. Voriconazole is the 

recommended treatment for patients 

diagnosed with invasive aspergillosis. 

However, amphotericin B and other 

antifungal drugs may also be used if 

voriconazole cannot be administered 

because a patient is suffering from 

porphyria (a rare inherited blood 

disorder) or has had an allergic reaction 

to the drug or the infection is not 

responding to treatment using 

voriconazole. In addition, according to 

the applicant, the efficacy of azole 

antifungal drugs such as posaconazole, 

in treating mucurmycosis is uncertain 

but has been described in certain 

situations. 

The applicant stated that it is 

sometimes challenging to clinically 

distinguish the type of antifungal 

infection a patient may be experiencing. 

Therefore, the typical treatment of 

patients exhibiting symptoms of 

infection includes both amphotericin B 

and voriconazole. According to the 

applicant, for the Medicare population, 

both drugs are usually administered in 

combination because it is difficult and 

time-consuming to delineate the specific 

type of fungal infections. The applicant 

noted that these patients are often 

severely ill and immediate treatment of 

these symptoms is essential to the 

effective management of their condition. 

We are concerned that CRESEMBA®

may be substantially similar to other 

currently approved antifungal drugs. We 

refer readers to the FY 2010 IPPS/RY 

2010 LTCH PPS final rule (74 FR 43813 

through 43814) for a discussion of our 

established criteria for evaluating 

whether a new technology is substantial 

similar to an existing technology. If a 

technology meets all three of these 

criteria, it would be considered 

substantially similar to an existing 

technology and would not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. 

In evaluating this technology for 

substantial similarity, we believe that 

CRESEMBA® has a similar mechanism 

of action as the other groups of 

antifungal drugs available for the 

treatment of patients with serious fungal 

infections, such as invasive aspergillosis 

and mucormycosis. As previously 

noted, voraconazole and itroconazole 

also are commonly used azole 

antifungals used to treat patients 

diagnosed with aspergillosis, and 

amphotericin B is a polyene antifungal 

commonly used to treat patients 

diagnosed with mucormycosis. The 

applicant maintained that the 

availability of the drug in an oral 

formulation constitutes a different 

mechanism of action. We disagree with 

the applicant’s assertion because we 

believe a different method of 

administration does not necessarily 

equate to a different mechanism of 

action. Although the applicant 

maintained that this technology is not 

substantially similar because it is 

administered orally, the applicant did 

not describe why it believed a different 

method of administration constitutes a 

different mechanism of action. Because 

CRESEMBA® is part of the category of 

drugs currently available known as 

azole antifungal drugs that inhibit the 

enzyme lanosterol 14 a-demethylase, it 

appears that the mechanism of action is 

not different, but that merely the 

method of administration differs. 

With respect to the second criterion 

for determining substantial similarity, 

we believe that the use of CRESEMBA®

is inclusive of the current treatment 

options available to Medicare 

beneficiaries and is also currently 

described (although not specifically) by 

established procedure codes that 

identify similar technologies, 

specifically other antifungal drugs that 

also are used in the treatment of patients 

diagnosed with similar fungal 

infections. The use of antifungal drugs 

is considered a nonoperating room 

procedure which does not impact the 

MS–DRG assignment of a patient case. 

Therefore, the use of CRESEMBA®

would not impact the MS–DRG 

assignment of a particular case. 

Furthermore, the technology is 

indicated for use in the treatment of the 

same or similar type of disease and the 

same or similar patient population. 

According to the applicant, 

CRESEMBA® is used in conjugation 

with other treatments, and this is 

reflected in its analysis for the new 

technology cost criterion. We are 

concerned that this technology is 

administered with the other currently 

available treatments, and therefore 

cannot be considered an alternative 

treatment option. Therefore, we believe 

that CRESEMBA® may be considered 

substantially similar to other available 

treatments and cannot be considered 

‘‘new’’ for purposes of new technology 

add-on payments. We are inviting 

public comments on if, and how, 

CRESEMBA® meets the newness 

criterion and our concerns regarding 

how it is substantially similar to other 

treatments for serious fungal infections. 

To demonstrate that the technology 

meets the cost criterion, the applicant 

performed two analyses. The applicant 

searched claims in the FY 2013 

MedPAR file (across all MS–DRGs) for 

any case reporting a principal or 

secondary diagnosis of aspergillosis 

(ICD–9–CM diagnosis code 117.3), 

zygomycosis [phycomycosis or 

mucormycosis] (ICD–9–CM diagnosis 

code 117.7), or pneumonia in 

aspergillosis (ICD–9–CM diagnosis code 

484.6). The applicant excluded any case 

that was treated at a hospital that is not 

paid under the IPPS, as well as any case 

where Medicare fee-for-service was not 

the primary payer. The applicant 

calculated the standardized charge for 

each eligible case and then inflated the 

standardized charge by 10.4427 percent 


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25Lin SJ, Schranz J, Teutsch SM.: Aspergillosis 

case-fatality rate: systematic review of the literature. 

ClinInfect Dis. 2001;32:358-66. 

26 Greenberg RN, Scott LJ, Vaughn HH, Ribes JA.: 

Zygomycosis (mucormycosis): emerging clinical 

importance and new treatments. Curr Opin Infect 

Dis. 2004;17:517-25. 

27Walsh TJ, Anaissie EJ, Denning DW, Herbrecht 

R, Kontoyiannis DP, Marr KA, et al.: Treatment of 

aspergillosis: clinical practice guidelines of the 

Infectious Diseases Society of America. Clin Infect 

Dis. 2008;46:327-60. 

28 Gonza ́lez GM.: Med Mycol. 2009 Feb;47(1):71– 

6. doi:10.1080/13693780802562969. Epub 2008 Dec 

Continued 

using the same inflation factor used by 

CMS to update the FY 2015 outlier 

threshold (79 FR 50379). The applicant 

assumed that the average length of stay 

for all eligible cases was 13.4 days based 

on its analysis. To determine the 

charges for the drug, the applicant 

assumed 13.4 days of therapy. 

According to the applicant, dosages of 

isavuconazole for a patient vary based 

on the day of therapy, but do not vary 

based on the patient’s weight. For the 

first and second day of therapy, the 

patient would be administered a loading 

dose of 200 milligrams (mg) every 8 

hours. For each subsequent day of 

therapy, the patient would be 

administered a maintenance dose of 200 

mg per day. 

For the first analysis, which was 

based on 100 percent of all MS–DRGs, 

the applicant identified a total of 5,984 

cases with at least one of the three ICD– 

9–CM codes (aspergillosis (ICD–9–CM 

diagnosis code 117.3), zygomycosis 

[phycomycosis or mucormycosis] (ICD– 

9–CM diagnosis code 117.7), or 

pneumonia in aspergillosis (ICD–9–CM 

diagnosis code 484.6)) across a total of 

333 MS–DRGs. The applicant’s rationale 

for using all the MS–DRGs was that it 

believed any patient diagnosed with 

either invasive aspergillosis or invasive 

mucormycosis (zygomycosis) could be 

eligible for treatment using 

isavuconazonium, regardless of the 

MS-DRG assignment. The applicant 

identified the average case-weighted 

threshold amounts for these 333 MS– 

DRGs as $72,186 using Table 10 from 

the FY 2015 IPPS/LTCH PPS final rule. 

The applicant did not remove charges 

for the other specific technologies from 

the average case-weighted standardized 

charge per case. The applicant’s 

rationale for not removing these charges 

was that the patients would be 

administrated isavuconazonium in 

combination with the other currently 

approved antifungal drugs as an 

effective treatment plan. The applicant 

computed a final inflated average caseweighted standardized charge per case 

of $151,450. Because this average caseweighted standardized charge per case 

exceeded the average case-weighted 

threshold amount from the FY 2015 

Table 10, the applicant maintained that 

CRESEMBA® meets the cost criterion 

using this first analysis. 

For its second analysis, the applicant 

analyzed 39 MS–DRGs that accounted 

for the top 75 cases of patients eligible 

for treatment using isavuconazonium; 

this was a subset of 4,510 cases. Using 

a methodology similar to the one used 

in its first analysis, the applicant 

computed the final inflated average 

case-weighted standardized charge per 

case of $159,622. The applicant 

identified an average case-weighted 

threshold amount for the 39 MS–DRGs 

of $74,366 using Table 10 from the 

FY2015 IPPS/LTCH PPS final rule. 

Because the final inflated average caseweighted standardized charge per case 

exceeded the average case-weighted 

threshold amount in the FY 2015 Table 

10, the applicant maintained that 

CRESEMBA® meets the cost criterion 

using this second analysis. 

We are concerned that the applicant 

did not remove any charges for the other 

antifungal drugs used during treatments 

(that is, the other component of the 

combination) because the applicant 

maintained that it would most likely be 

necessary for patients who are treated 

using CRESEMBA® to also continue 

treatment using the other antifungal 

drugs or medications in order to achieve 

successful treatment due to the severity 

of their symptoms. We believe that the 

applicant should have removed the 

charges for the other antifungal drugs 

used for treatments. We also note that 

the applicant did not provide 

information to substantiate its assertion 

that the charges for these cases would 

not be reduced because of the severity 

of illness among the patients. The 

applicant inferred that patients treated 

using CRESEMBA® would be dependent 

upon the simultaneous and combined 

use of the other existing therapies to 

achieve successful treatment. Therefore, 

we are concerned about the possibility 

of drug toxicity, poly pharmacy, and 

drug-to-drug interactions, especially 

among the Medicare population. 

We are seeking public comment on 

whether CRESEMBA® meets the cost 

criterion, specifically with regard to our 

concerns regarding the applicant’s 

analyses and methodology. 

With regard to substantial clinical 

improvement, the applicant believed 

that CRESEMBA® represents a 

substantial clinical improvement over 

existing therapies for patients diagnosed 

with invasive aspergillus and 

mucormycosis based on its potentially 

improved efficacy profile, potentially 

improved safety profile, more favorable 

pharmacokinetic profile, and improved 

method of administration. The applicant 

discussed the unmet medical need for 

alternative treatment options for 

patients diagnosed with invasive 

aspergillosis and mucormycosis. 

Current treatments have limitations 

related to safety, side effects, and 

efficacy.25 26 The applicant provided 

information regarding its SECURE 

study, where the primary endpoint of 

all-cause mortality through day 42 

showed that CRESEMBA® demonstrated 

noninferiority to voriconazole. The 

primary endpoint of all-cause mortality 

through day 42 in the intent-to-treat 

population (ITT, N = 516) was 18.6 

percent in the isavuconazonium 

treatment group and 20.2 percent in the 

voriconazole group. However, according 

to the applicant, the overall safety 

profile for CRESEMBA® demonstrated 

similar rates of mortality and nonfatal 

adverse events as the comparator, 

voriconazole. The applicant also shared 

information from other clinical trials. 

One of these clinical trials that studied 

the treatment of patients diagnosed with 

invasive aspergillosis showed treatmentemergent adverse reactions occurred in 

96 percent and 99 percent of patients 

receiving the CRESEMBA® and 

voriconazole, respectively. We are 

concerned that the adverse reactions 

associated with the use of CRESEMBA®

and voriconazole appear to be similar. 

We also are concerned that the 

applicant did not conduct the clinical 

trials evaluating head-to-head 

comparisons to alternative therapies 

such as amphotericin B. Currently, 

amphotericin B is the only 

FDA-approved drug for the treatment of 

mucormycosis, which also can be used 

to treat aspergillosis. The applicant’s 

description of the technology was based 

on peer reviewed literature, which may 

be considered historical data. 

With regard to improved efficacy, the 

applicant made several assertions. The 

applicant maintained that the use of 

CRESEMBA® can potentially decrease 

the rate of subsequent diagnostic or 

therapeutic interventions. According to 

the applicant, the technology lacks the 

adverse side effects of nephrotoxicity 

associated with amphotericin B.27

However, we are concerned that the 

results of the study reported by the 

applicant did not reflect this. 

Specifically, the applicant believed 

that CRESEMBA® has positive activity 

against a broad range of fungi, including 

those resistant to other agents, thereby 

potentially decreasing subsequent 

therapeutic interventions.28 However, 


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18. PMID: 19101837 [PubMed—indexed for 

MEDLINE] 29 Kontoyiannis DP, Lewis RE.: How I treat 

mucormycosis. Blood. 2011;118:1216-24. 30 Khandelwal N, Franks B, Shi F, Spalding J, 

Azie N. Health Economic Outcome Analysis of 

Patients Randomized in the SECURE Phase 3 Trial 

Comparing Isavuconazole to Voriconazole for 

Primary Treatment of Invasive fungal Disease 

Caused by Aspsergillus Species or Other 

Filamentous Fungi. 

31Walsh TJ, Anaissie EJ, Denning DW, Herbrecht 

R, Kontoyiannis DP, Marr KA, et al. Treatment of 

aspergillosis: Clinical practice guidelines of the 

Infectious Diseases Society of America. Clin Infect 

Dis. 2008;46:327-60. 

the applicant stated that the referenced 

literature indicates that further in-vivo 

studies are required in order to confirm 

the efficacy for treatment of severe 

infections caused by these fungi in 

immunocompromised patients. 

According to the applicant, 

CRESEMBA® is used to treat 

immunocomprised patients who are 

severely ill. The applicant also stated 

that CRESEMBA® can be used to treat 

patients diagnosed with invasive fungal 

infections before the pathogen has been 

identified, thereby potentially 

decreasing subsequent diagnostic and 

therapeutic interventions.29 The 

applicant maintained that the use of 

CRESEMBA® decreases the number of 

future hospitalizations or physician 

visits. We are concerned that the 

applicant did not provide data to 

support this determination. One of the 

applicant’s studies, SECURE, which was 

a global, Phase 3, multicenter, 

randomized, double-blind, parallel 

group, noninferiority trial that evaluated 

isavuconazole versus voriconazole for 

the primary treatment of patients with 

invasive fungal disease (IFDs) caused by 

aspergillus spp. and other filamentous 

fungi was discussed by the applicant in 

its application. The results of the study 

were presented in a paper stating that 

the length of stay for patients 

hospitalized with renal impairment was 

statistically significantly shorter in the 

treatment of patients in the 

isavuconazole arm (9 days) compared 

with patients treated with voriconazole 

in the control arm. According to the 

applicant, patients treated with 

isavuconazonale showed shorter 

hospital length of stay compared to 

those treated with voriconazole in the 

overall study population. Subgroup 

analyses of patients who were aged 65 

years and older and patients with a BMI 

equal to or greater than 30 kg/m2 also 

had shorter, but not statistically 

significant, differences in length of stay 

when treated with isavuconazonale 

compared to voriconazole. The paper on 

the study revealed concerns about the 

small sample size in the subgroup (n = 

516) and that the differences were not 

statistically significant.30

With regard to improved safety and a 

more favorable pharmacokinetic profile, 

the applicant made several assertions. 

The applicant asserted that 

CRESEMBA® has the potential for 

simpler and more predictable dosing 

based on improved pharmacokinetics 

compared with other azole antifungal 

drugs, but the applicant did not provide 

data to substantiate this assertion. In 

addition, the applicant asserted that 

CRESEMBA® has a lower drug-drug 

interaction potential than voriconazole 

or itraconazole, but did not provide data 

to substantiate this assertion. 

Furthermore, the applicant maintained 

that CRESEMBA® can be safely used in 

treating patients with renal impairment, 

whereas currently available treatments 

can harm the kidneys.31 In the paper 

accompanying the application, the 

applicant discussed aspergillosis and 

the various treatment options available 

and the advantages of voriconazole over 

deoxycholate amphotericin B (D–AMB) 

as primary treatment for patients with 

invasive aspergillosis. We are concerned 

that these results were not 

communicated in the resulting data 

provided by the applicant that were 

obtained from the trials. We also are 

concerned that the applicant did not 

provide a rationale for its assertion that 

the use of CRESEMBA® represents a 

substantial clinical improvement for 

Medicare beneficiaries because of 

‘‘simpler and more predictable dosing’’ 

nor did the applicant provide additional 

information and data regarding drug-todrug interactions and nephrotoxicity. 

In addition, the applicant maintained 

that the technology has an improved 

method of administration compared to 

current treatment alternatives. 

Specifically, the applicant asserted that 

the availability of this technology as an 

oral formulation is an improvement 

compared to other existing treatments, 

which are solely administered 

intravenously. We are concerned about 

the applicant’s assertion because other 

currently approved and available 

antifungal drugs, such as voriconazole 

(tablets, oral suspension, or intravenous 

administration), itraconazole (capsules, 

oral solution, or parenteral solution), 

and posaconazole (oral suspension or 

parenteral solution), also can be 

administered orally as well as parenteral 

for patients diagnosed with these types 

of fungal infections. In addition, we are 

aware that intravenous administration 

of antifungal drugs may be necessary 

because patients diagnosed with 

invasive aspergillosis and 

mucuromycosis and treated as 

inpatients are often severely ill and may 

not be able to tolerate any food or 

medications orally. We are seeking 

public comments on whether or not 

CRESEMBA® meets the substantial 

clinical improvement criterion, 

specifically taking into consideration 

our concerns described above. 

We did not receive any written public 

comments in response to the New 

Technology Town Hall Meeting 

regarding the application for 

CRESEMBA® for new technology addon payments. 

f. Idarucizumab 

Boehringer Ingelheim 

Pharmaceuticals, Inc. submitted an 

application for new technology add-on 

payments for Idarucizumab, a product 

developed as an antidote to reverse the 

effects of PRADAXA® (Dabigatran), 

which is also manufactured by 

Boehringer Ingelheim Pharmaceuticals, 

Inc. Dabigatran is an oral direct 

thrombin inhibitor currently indicated 

to: (1) Reduce the risk of stroke and 

systemic embolism in patients who have 

been diagnosed with nonvalvular atrial 

fibrillation (NVAF); (2) treat deep 

venous thrombosis (DVT) and 

pulmonary embolism (PE) in patients 

who have been administered a 

parenteral anticoagulant for 5 to 10 

days; and (3) reduce the risk of 

recurrence of DVT and PE in patients 

who have been previously diagnosed 

with NVAF. Currently, unlike the 

anticoagulant Warfarin, there is no 

specific way to reverse the anticoagulant 

effect of Dabigatran in the event of a 

major bleeding episode. 

Idarucizumab is a humanized 

fragment antigen binding (Fab) 

molecule, which specifically binds to 

Dabigatran to deactivate the 

anticoagulant effect, thereby allowing 

thrombin to act in blood clot formation. 

The applicant stated that Idarucizumab 

represents a new pharmacologic 

approach to neutralizing the specific 

anticoagulant effect of Dabigatran in 

emergency situations. If FDA approval 

is granted, Idarucizumab would be the 

only FDA-approved therapy available to 

neutralize the anticoagulant effect of 

Dabigatran. The current approach for 

the management of the anticoagulant 

effect of Dabigatran prior to an invasive 

procedure is to withhold administration 

of Dabigatran, when possible, for a 

certain duration of time prior to the 

procedure to allow sufficient time for 

the patient’s kidneys to flush out the 

medication. The duration of time 

needed to flush out the medication prior 

to the surgical procedure is based on the 

patient’s kidney function. According to 

the applicant, if surgery cannot be 


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delayed to allow the kidneys the 

necessary time to flush out the traces of 

Dabigatran, there is an increased risk of 

bleeding. 

Based on the proposed FDA 

indication for Idarucuzimab, the 

product can be used in the treatment of 

patients who have been diagnosed with 

NVAF and administered Dabigatran to 

reverse life-threatening bleeding events, 

or who require emergency surgery or 

medical procedures and rapid reversal 

of the anticoagulant effects of 

Dabigatran is necessary and desired. As 

of this date, Idarucuzimab has not 

received approval from the FDA. 

However, in June 2014, the FDA granted 

Idarucizumab Breakthrough Therapy 

Designation. In addition, the applicant 

plans to seek Fast Track Designation 

from the FDA. Currently, there are no 

specific ICD–9–CM or ICD–10–PCS 

procedure codes that describe the use of 

Idarucizumab. As stated above, effective 

October 1, 2015 (FY 2016), the ICD–10 

coding system will be implemented. 

The applicant submitted a request for 

unique ICD–10–PCS codes that was 

presented at the March 18, 2015 ICD–10 

Coordination and Maintenance 

Committee meeting. If approved, the 

codes will be effective on October 1, 

2015 (FY 2016). More information on 

this request can be found on the CMS 

Web site at: http://www.cms.gov/

Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

We are inviting public comments on 

whether Idarucizumab meets the 

newness criterion. 

With regard to the cost criterion, the 

applicant conducted four analyses. The 

applicant began by researching the FY 

2013 MedPAR file for cases that may be 

eligible for Idarucizumab using a 

combination of ICD–9–CM diagnosis 

and procedure codes. Specifically, the 

applicant searched the database for 

cases reporting anticoagulant therapy 

diagnosis codes E934.2 (Agents 

primarily affecting blood constituents, 

anticoagulants) or V58.61 (Long-term 

(current) use of anticoagulants) in 

combination with either current 

standard of care procedure codes 99.03 

(Other transfusion of whole blood), 

99.04 (Transfusion of packed cells), 

99.05 (Transfusion of platelets), 99.06 

(Transfusion of coagulation factors), 

99.07 (Transfusion of other serum), or 

39.95 (Hemodialysis), and Dabigatran 

indication diagnosis codes 427.31 

(Atrial fibrillation), 453.40 (Acute 

venous embolism and thrombosis of 

unspecified deep vessels of lower 

extremity), 453.41 (Acute venous 

embolism and thrombosis of deep 

vessels of proximal lower extremity), 

453.42 (Acute venous embolism and 

thrombosis of deep vessels of distal 

lower extremity), 453.50 (Chronic 

venous embolism and thrombosis of 

unspecified deep vessels of lower 

extremity), 453.51 (Chronic venous 

embolism and thrombosis of deep 

vessels of proximal lower extremity), 

453.52 (Chronic venous embolism and 

thrombosis of deep vessels of distal 

lower extremity), 415.11 (Iatrogenic 

pulmonary embolism and infarction), 

415.12 (Septic pulmonary embolism), 

415.13 (Saddle embolus of pulmonary 

artery), 415.19 (Other pulmonary 

embolism and infarction), 416.2 

(Chronic pulmonary embolism), V12.51 

(Personal history of venous thrombosis 

and embolism), or V12.55 (Personal 

history of pulmonary embolism). 

To further target potential cases that 

may be eligible for Idarucizumab, the 

applicant also excluded specific cases 

based on Dabigatran contraindications, 

including all cases representing patients 

who have been diagnosed with chronic 

kidney disease (CKD) stage V (diagnosis 

code 585.5), end-stage renal disease 

(diagnosis code 585.6), prosthetic heart 

valves (diagnosis code V43.3), and cases 

representing patients who have been 

diagnosed with both CKD stage IV 

(diagnosis code 585.4) and either DVT 

or PE (using the same ICD–9–CM 

diagnosis codes listed above). As a 

result, the applicant identified 103,752 

cases that mapped to 694 MS–DRGs. 

The applicant standardized the charges 

and computed an average case-weighted 

standardized charge per case of $57,611. 

The applicant then identified hospital 

charges potentially associated with the 

current treatments to reverse 

anticoagulation, specifically charges 

associated with pharmacy services, 

dialysis services, and laboratory services 

for blood work. Due to limitations 

associated with the claims data, the 

applicant was unable to determine the 

specific drugs used to reverse 

anticoagulation and if these cases 

represented patients who required 

laboratory services for blood work or 

dialysis services unrelated to the 

reversal of anticoagulation. Therefore, 

the applicant subtracted 40 percent of 

the charges related to these three 

categories from the standardized charge 

per case, based on the estimation that 

the full amount of charges associated 

with these services would not be 

incurred by hospitals if Idarucizumab is 

approved and available for use in the 

treatment of patients who have been 

diagnosed with NVAF and administered 

Dabigatran during treatment. The 

applicant then inflated the standardized 

charge per case by 10.4227 percent, the 

same inflation factor used by CMS to 

update the FY 2015 outlier threshold 

(79 FR 50379). This resulted in an 

inflated average case-weighted 

standardized charge per case of $59,582. 

Using the FY 2015 IPPS Table 10 

thresholds, the average case-weighted 

threshold amount across all 694 MS– 

DRGs is $54,850 (all calculations above 

were performed using unrounded 

numbers). Because the inflated average 

case-weighted standardized charge per 

case exceeds the average case-weighted 

threshold amount, the applicant 

maintained that the technology meets 

the cost criterion under this analysis. 

The applicant also performed a 

similar analysis by using the same data 

from the FY 2013 MedPAR file and 

subtracting 60 percent of the charges 

associated with pharmacy services, 

dialysis services, and laboratory services 

for blood work. This resulted in an 

inflated average case-weighted 

standardized charge per case of $57,560. 

Using the FY 2015 IPPS Table 10 

thresholds, the average case-weighted 

threshold amount across all 694 MS– 

DRGs is $54,850 (all calculations above 

were performed using unrounded 

numbers). Because the inflated average 

case-weighted standardized charge per 

case for the applicable MS–DRGs 

exceeds the average case-weighted 

threshold amount, the applicant 

maintained that the technology also 

meets the cost criterion under this 

analysis. 

Further, the applicant conducted two 

additional analyses using the same data 

from the FY 2013 MedPAR file and 

variables used in the previous analyses. 

However, instead of using potentially 

eligible cases that mapped to 100 

percent of the 694 MS–DRGs identified, 

the applicant used potentially eligible 

cases that mapped to the top 75 percent 

of the 694 MS–DRGs identified. By 

applying this limitation, the applicant 

identified 77,667 cases that mapped to 

92 MS–DRGs. Under the analysis’ 

variable that subtracted 40 percent of 

the charges associated with the current 

treatments to reverse anticoagulation, 

the applicant computed an inflated 

average case-weighted standardized 

charge per case of $56,627. Under the 

analysis’ variable that subtracted 60 

percent of the charges associated with 

the current treatments to reverse 

anticoagulation, the applicant computed 

an inflated average case-weighted 

standardized charge per case of $54,677. 

Using the FY 2015 IPPS Table 10 

thresholds, the average case-weighted 

threshold amount across all 92 MS– 

DRGs using both scenarios is $53,008 

(all calculations above were performed 

using unrounded numbers). Because the 

inflated average case-weighted 


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32Healy, et al.: Periprocedural bleeding and 

thromboembolic events with dabigatran compared 

with warfarin: results from the randomized 

evaluation of long-term anticoagulation therapy 

(RE-LY) randomized trial, Circulation, 2012; 

126:343–348. 

33Pradaxa® (Dabigatran Etexilate Mesylate) 

prescribing information. Ridgefield, CT: Boehringer 

Ingelheim; 2014. 

34Honickel, et al.: Reversal of dabigatran 

anticoagulation ex vivo: Porcine study comparing 

prothrombin complex concentrates and 

idarucizumab, Thrombosis and Hemostasis, 

International Journal for Vascular Biology and 

Medicine, Vol. 113, April 2015. 

standardized charge per case exceeds 

the average case-weighted threshold 

amount, the applicant maintained that 

the technology also meets the cost 

criterion under these variant analyses. 

The applicant noted that the inflated 

average case-weighted standardized 

charge per case computed using all four 

scenarios did not include any charges 

for Idarucizumab. Therefore, the 

applicant maintained that the 

technology would also meet the cost 

criterion if charges for Idarucizumab 

were included because the inflated 

average case-weighted standardized 

charge per case would increase and 

further exceed the average caseweighted threshold amount using the 

variables of all four analyses. We are 

inviting public comments regarding the 

applicant’s analyses with respect to the 

cost criterion. 

With regard to substantial clinical 

improvement, according to the 

applicant, there are currently no specific 

FDA-approved antidotes to reverse the 

anticoagulant effects of Dabigatran. 

Management of the treatment of patients 

who have been diagnosed with NVAF 

and administered Dabigatran and 

experience bleeding may often include 

supportive care such as Hemodialysis 

and the use of fresh frozen plasma, 

blood factor products such as 

prothrombin complex concentrates 

(PCC), activated prothrombin complex 

concentrates, and recombinant factor 

VIIa or delayed intervention. Protamine 

sulfate and Vitamin K are typically used 

to reverse the effects of Heparin and 

Warfarin, respectively. However, due to 

the mechanism of action in Dabigatran, 

the applicant maintained that the use of 

protamine sulfate and Vitamin K may 

not be effective to reverse the 

anticoagulant effect of Dabigatran. 

The applicant provided information 

regarding the management of major 

bleeding events experienced by patients 

who were administered Dabigatran and 

Warfarin during the RE-LY trial.32

During this study, most major bleeding 

events were only managed by 

supportive care. Patients who were 

administered 150 mg of Dabigatran were 

transfused with pack red blood cells 

more often when compared to patients 

who were administered Warfarin (61.4 

percent versus 49.9 percent, 

respectively). However, patients who 

were administered Warfarin were 

transfused with plasma more often 

when compared to patients who were 

administered 150 mg of Dabigatran (30.2 

percent versus 21.6 percent, 

respectively). In addition, the use of 

Vitamin K in the treatment of patients 

who were administered Warfarin was 

more frequent when compared to the 

frequency of use in the treatment of 

patients who were administered 150 mg 

of Dabigatran (27.3 percent versus 10.3 

percent, respectively). The use of PCCs, 

recombinant factor VIIa and other 

coagulation factor replacements in the 

treatment of patients who were 

administered both Warfarin and 150 mg 

of Dabigatran was minimal, and did not 

significantly differ in frequency when 

compared among patients assigned to 

either group. Hemodialysis was used in 

a single case. 

The applicant reported that, currently, 

it is recommended that the 

administration of Dabigatran be 

discontinued 1 to 2 days (CrCl ≥50 ml/ 

min) or 3 to 5 days (CrCl <50 ml/min), 

if possible, before invasive or surgical 

procedures because of the increased risk 

of bleeding.33 A longer period of 

discontinuation time should be 

considered for patients undergoing 

major surgery, spinal puncture, or 

placement of a spinal or epidural 

catheter or port, if complete hemostasis 

is required. The applicant stated that 

delaying emergency medical or surgical 

procedures can cause urgent conditions 

to become more severe if intervention is 

not initiated. The applicant further 

maintained that delaying emergency 

medical or surgical procedures for an 

extended period of time can ultimately 

lead to negative healthcare outcomes 

and increased healthcare costs. The 

applicant asserted that rapidly reversing 

the anticoagulant effect of Dabigatran 

administered to patients that require an 

urgent medical procedure or surgery 

allows the medical procedure or surgery 

to be performed in a timely manner, 

which in turn may decrease 

complications and minimize the need 

for more costly therapies. 

The applicant noted that 

Idarucizumab was shown to neutralize 

the anticoagulant effect of Dabigatran in 

both animal models and healthy human 

volunteers.34 In a swine blunt liver 

trauma injury model, the applicant 

stated that Idarucizumab effectively 

reversed life-threatening bleeding 

episodes resulting from trauma in pigs. 

The applicant also provided data from 

a randomized, double-blind, placebocontrolled phase I study of healthy male 

volunteers to investigate the safety, 

tolerability, and pharmacokinetics of 

administering single rising doses of 

Idarucizumab (Part 1) and explore the 

variant of dosages of Idarucizumab 

administered to patients that effectively 

reversed the anticoagulant effect of 

Dabigatran (Part 2). Safety data is 

limited in humans to 110 healthy male 

patients enrolled in the study that were 

administered dosages of Idarucizumab 

that ranged from 20 mg to 8 grams. In 

this study, 135 patients received 

placebo. The applicant reported that 

adverse events were generally mild in 

intensity and non-specific. Healthy 

human volunteers enrolled in the phase 

I study (1321.1) were administered 

Idarucizumab in dosages of 2 and 4 

grams, which resulted in immediate and 

complete reversal of the anticoagulant 

effect of Dabigatran that was sustained 

for several hours. The applicant noted 

that in preclinical studies, the reversal 

of the anticoagulant effects of 

Dabigatran was associated with the 

reversal of bleeding. These effects were 

consistent in animal models of renal 

dysfunction, hypovolemia and shock, 

and trauma related bleeding. The 

applicant concluded that the data from 

these studies demonstrates that 

Idarucizumab effectively, safely, and 

potently reverses the anticoagulant 

effect of Dabigatran in both animal 

models and healthy human volunteers. 

With regard to the substantial clinical 

improvement criterion, we believe that 

Idarucizumab, if approved by the FDA, 

may represent a treatment option that is 

not currently available to Medicare 

beneficiaries and, therefore, represents a 

substantial clinical improvement. 

However, we are concerned that the 

clinical data are not sufficient. 

Specifically, the applicant provided 

data from an animal model. In addition, 

the primary clinical data in relation to 

human volunteers are based primarily 

on a trial to measure safety. While the 

applicant did provide clinical data on 

the effectiveness of Idarucizumab, we 

are concerned that the evidence 

presented does not support the 

substantial clinical improvement 

criterion. Specifically, the applicant 

provided data from a small sample used 

to demonstrate effectiveness. Usually 

during clinical studies, phase III of a 

clinical trial is typically used to gather 

data from a larger patient population to 

demonstrate effectiveness. We are 

inviting public comments on whether or 

not Idarucizumab meets the substantial 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24447 

35Tepe G, Zeller T, Albrecht T, Heller S, 

Schwarzwa ̈lder U, Beregi JP, Claussen CD, 

Oldenburg A, Scheller B, Speck U.: Local delivery 

of paclitaxel to inhibit restenosis during angioplasty 

of the leg. N Engl J Med 2008; 358: 689–99. 

36Anderson JL, Halperin JL, Albert NM, Bozkurt 

B, Brindis RG, Curtis LH, DeMets D, Guyton RA, 

Hochman JS, Kovacs RJ, Ohman EM, Pressler SJ, 

Sellke FW, Shen WK.: Management of patients with 

peripheral artery disease (compilation of 2005 and 

2011 ACCF/AHA guideline recommendations): a 

report of the American College of Cardiology 

Foundation/American Heart Association Task Force 

on Practice Guidelines. J Am Coll Cardiol 2013; 

61:1555–70. Available at: http://dx.doi.org/10.1016/ 

j.jacc.2013.01.004. 

37Owens, CD.: Drug eluting balloon overview: 

technology and therapy. Presented at LINC 2011, 

Leipzig, Germany. 38Scheller B.: Opportunities and limitations of 

drug-coated balloon in interventional therapies. 

Herz 2011;36:232–40. 

clinical improvement criterion, 

specifically in regard to these concerns. 

g. LUTONIX® Drug-Coated Balloon 

(DCB) Percutaneous Transluminal 

Angioplasty (PTA) Catheter and 

IN.PACTTM AdmiralTM Paclitaxel 

Coated Percutaneous Transluminal 

Angioplasty (PTA) Balloon Catheter 

Two manufacturers, CR Bard Inc. and 

Medtronic, submitted applications for 

new technology add-on payments for FY 

2016 for LUTONIX® Drug-Coated 

Balloon (DCB) Percutaneous 

Transluminal Angioplasty (PTA) 

Catheter (LUTONIX®) and IN.PACTTM

AdmiralTM Paclitaxel Coated 

Percutaneous Transluminal Angioplasty 

(PTA) Balloon Catheter (IN.PACTTM

AdmiralTM), respectively. Both of these 

technologies are drug-coated balloon 

angioplasty treatments for patients 

diagnosed with peripheral artery disease 

(PAD). Typical treatments for patients 

with PAD include angioplasty, stenting, 

atherectomy and vascular bypass 

surgery. PAD most commonly occurs in 

the femoropopliteal segment of the 

peripheral arteries, is associated with 

significant levels of morbidity and 

impairment in quality of life, and 

requires treatment to reduce symptoms 

and prevent or treat ischemic events.35

Treatment options for symptomatic PAD 

include noninvasive treatment such as 

medication and life-style modification 

(for example, exercise programs, diet, 

and smoking cessation) and invasive 

options which include endovascular 

treatment and surgical bypass. The 2013 

American College of Cardiology and 

American Heart Association (ACC/ 

AHA) guidelines for the management of 

PAD recommend endovascular therapy 

as the first-line treatment for 

femoropopliteal artery lesions in 

patients suffering from claudication 

(Class I, Level A recommendation).36

The applicants for LUTONIX® and 

IN.PACTTM AdmiralTM stated that, in 

patients diagnosed with PAD, the 

femoropopliteal artery is characterized 

by difficult to treat lesions that can be 

long and diffuse, in a vessel that is 

considered the most mechanically 

stressed artery with a number of 

dynamic forces that impact the artery 

including shortening/elongation, 

torsion, compression and flexion. 

According to the applicants, the unique 

challenges of treating the 

femoropopliteal artery in patients 

diagnosed with PAD relate to 

insufficient outcomes from current 

endovascular therapies, in particular 

PTA and stent implantations. Coating of 

femoral and coronary stents with an 

antiproliferative drug, such as 

paclitaxel, sirolimus, everolimus, or 

zotarolimus, that is slowly released 

when it comes in contact with the 

arterial wall, is intended to reduce 

development of restenosis in the stented 

segment of the artery.37 38

The applicants noted that drug-coated 

balloon catheters are designed to deliver 

an antiproliferative drug directly to the 

arterial segment being dilated. Rather 

than using a stent to deliver the drug 

slowly to the dilated area, the drug 

coating of a balloon is designed to 

transfer the drug to the arterial wall by 

direct contact over a few minutes. The 

applicant maintained that if the drug is 

absorbed into the arterial wall, rather 

than being washed away by blood flow 

once the balloon is deflated, the drug 

can exert its antiproliferative effects on 

the vessel with the goal of preventing 

restenosis. 

The applicants stated that the drugcoated balloon catheter is a device-drug 

combination product comprised of a 

device component (an over-the-wire 

balloon catheter) and a drug component 

(a paclitaxel-urea coating in the case of 

IN.PACTTM and a paclitaxel- sorbitol for 

LUTONIXTM AdmiralTM) on the balloon, 

intended for the treatment of patients 

with PAD, specifically superficial 

femoral artery (SFA) and popliteal 

artery disease. The device is engineered 

for two modes of action: the primary 

mode of action is attributable to the 

balloon’s mechanical dilatation of de 

novo or restenotic lesions in the vessel; 

and the secondary mode of action 

consists of drug delivery and 

application of paclitaxel to the vessel 

wall to inhibit the restenosis that is 

normally associated with the 

proliferative response to the PTA 

procedure. Following predilatation with 

a nondrug-coated PTA balloon, the 

interventionalist selects a drug-coated 

balloon with diameter of 100 percent of 

reference vessel diameter (RVD) and 

length sufficient to treat 5mm proximal 

and distal to the target lesion and 

predilated segment (including overlap 

of multiple balloons). The 

interventionalist inflates the drugcoated balloon for a minimum inflation 

time of 30 seconds for delivery of 

paclitaxel, and keeps the balloon 

inflated for as long as necessary to 

achieve a satisfactory procedural result, 

which is the standard of care for all 

balloon angioplasties. 

According to both applicants, 

LUTONIX® and IN.PACTTM AdmiralTM

are the first drug coated balloons that 

can be used for treatment of patients 

who are diagnosed with PAD. Because 

cases eligible for the two devices would 

group to the same MS–DRGs and we 

believe that these devices are 

substantially similar to each other (that 

is, they are intended to treat the same 

or similar disease in the same or similar 

patient population and are purposed to 

achieve the same therapeutic outcome 

using the same or similar mechanism of 

action), we believe that it is appropriate 

to evaluate both technologies as one 

application for new technology add-on 

payment under the IPPS. The applicants 

submitted separate cost and clinical 

data, and we reviewed and discuss each 

set of data separately. However, we 

intend to make one determination 

regarding new technology add-on 

payments that will apply to both 

devices. We believe that this is 

consistent with our policy statements in 

the past regarding substantial similarity. 

Specifically, we have noted that 

approval of new technology add-on 

payments would extend to all 

technologies that are substantially 

similar (66 FR 46915), and that we 

believe that continuing our current 

practice of extending a new technology 

add-on payment without a further 

application from the manufacturer of 

the competing product or a specific 

finding on cost and clinical 

improvement if we make a finding of 

substantial similarity among two 

products is the better policy because we 

avoid— 

• Creating manufacturer-specific 

codes for substantially similar products; 

• Requiring different manufacturers 

of substantially similar products from 

having to submit separate new 

technology applications. 

• Having to compare the merits of 

competing technologies on the basis of 

substantial clinical improvement; and 

• Bestowing an advantage to the first 

applicant representing a particular new 

technology to receive approval. (70 FR 

47351) 

If these substantially similar 

technologies had been submitted for 

review in different (and subsequent) 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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years, rather than the same year, we 

would evaluate and make a 

determination on the first application 

and apply that same determination to 

the second application. However, 

because the technologies have been 

submitted for review in the same year, 

we believe it is appropriate to consider 

both sets of cost data and clinical data 

in making a determination because we 

do not believe that it is possible to 

choose one set of data over another set 

of data in an objective manner. 

CR Bard, Inc. received FDA approval 

for LUTONIX® on October 9, 2014. 

Commercial sales in the U.S. market 

began on October 10, 2014. Medtronic 

received FDA approval for IN.PACTTM

AdmiralTM on December 30, 2014. 

Commercial sales in the U.S. market 

began on January 29, 2015. As stated in 

section II.G.1.a. of the preamble of this 

proposed rule, effective October 1, 2015 

(FY 2016), the ICD–10 coding system 

will be implemented. We note that the 

applicant submitted a request and 

presented at the September 2014 ICD–10 

Coordination and Maintenance 

Committee Meeting to create ICD–10– 

PCS codes to uniquely identify drugcoated PTA balloons used for treating 

PAD. More information on this request 

can be found on the CMS Web site at: 

http://www.cms.gov/Medicare/Coding/ 

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

We received public comments during 

and after the ICD–10 Coordination and 

Maintenance Committee meeting that 

supported the creation of unique codes 

to identify the use of a drug-coated 

balloon in procedures performed for 

treating PAD. As a result, the following 

ICD–10–PCS codes listed in the table 

below were created and are effective 

October 1, 2015 (FY 2016): 

ICD–10–PCS code Code description 

047K041 ....................... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 

047K0D1 ....................... Dilation of right femoral artery with intraluminal device using drug-coated balloon, open approach. 

047K0Z1 ....................... Dilation of right femoral artery using drug-coated balloon, open approach. 

047K341 ....................... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 

047K3D1 ....................... Dilation of right femoral artery with intraluminal device using drug-coated balloon, percutaneous approach. 

047K3Z1 ....................... Dilation of right femoral artery using drug-coated balloon, percutaneous approach. 

047K441 ....................... Dilation of right femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous 

endoscopic approach. 

047K4D1 ....................... Dilation of right femoral artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 

047K4Z1 ....................... Dilation of right femoral artery using drug-coated balloon, percutaneous endoscopic approach. 

047L041 ........................ Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 

047L0D1 ....................... Dilation of left femoral artery with intraluminal device using drug-coated balloon, open approach. 

047L0Z1 ........................ Dilation of left femoral artery using drug-coated balloon, open approach. 

047L341 ........................ Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 

047L3D1 ....................... Dilation of left femoral artery with intraluminal device using drug-coated balloon, percutaneous approach. 

047L3Z1 ........................ Dilation of left femoral artery using drug-coated balloon, percutaneous approach. 

047L441 ........................ Dilation of left femoral artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous endoscopic 

approach. 

047L4D1 ....................... Dilation of left femoral artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 

047L4Z1 ........................ Dilation of left femoral artery using drug-coated balloon, percutaneous endoscopic approach. 

047M041 ....................... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 

047M0D1 ...................... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, open approach. 

047M0Z1 ....................... Dilation of right popliteal artery using drug-coated balloon, open approach. 

047M341 ....................... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 

047M3D1 ...................... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, percutaneous approach. 

047M3Z1 ....................... Dilation of right popliteal artery using drug-coated balloon, percutaneous approach. 

047M441 ....................... Dilation of right popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous 

endoscopic approach. 

047M4D1 ...................... Dilation of right popliteal artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 

047M4Z1 ....................... Dilation of right popliteal artery using drug-coated balloon, percutaneous endoscopic approach. 

047N041 ....................... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, open approach. 

047N0D1 ....................... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, open approach. 

047N0Z1 ....................... Dilation of left popliteal artery using drug-coated balloon, open approach. 

047N341 ....................... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous approach. 

047N3D1 ....................... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, percutaneous approach. 

047N3Z1 ....................... Dilation of left popliteal artery using drug-coated balloon, percutaneous approach. 

047N441 ....................... Dilation of left popliteal artery with drug-eluting intraluminal device using drug-coated balloon, percutaneous 

endoscopic approach. 

047N4D1 ....................... Dilation of left popliteal artery with intraluminal device using drug-coated balloon, percutaneous endoscopic approach. 

047N4Z1 ....................... Dilation of left popliteal artery using drug-coated balloon, percutaneous endoscopic approach. 

As we discuss above, the approval of 

new technology add-on payments 

would extend to all technologies that 

are substantially similar. Otherwise, our 

payment policy would bestow an 

advantage to the first applicant to 

receive approval for a particular new 

technology (66 FR 46915). Moreover, as 

we discuss above, we believe that 

applications for substantially similar 

technologies should be evaluated in a 

manner that avoids, among other things, 

having to compare the merits of 

competing technologies on the basis of 

substantial clinical improvement. If we 

receive applications for substantially 

similar technologies in different years, 

we would apply the first determination 

to any subsequent applications for 

substantially similar technologies. 

However, because, in this case, two 

substantially similar technologies have 

applied for a new technology add-on 

payment for the same Federal fiscal 

year, we believe it is consistent with our 

policy to make one determination using 

all of the information submitted for the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24449 

technologies rather than choosing one 

set of information to consider and not 

considering the other set of information. 

We believe that, in accordance with our 

policy, it is appropriate to use the 

earliest market availability date 

submitted as the beginning of the 

newness period. Accordingly, for both 

devices, based on our policy, if 

approved for new technology add-on 

payments, we believe that the beginning 

of the newness period would be October 

10, 2014. We are inviting public 

comments on whether these two 

technologies meet the newness 

criterion. 

As we stated above, each applicant 

submitted separate analyses regarding 

the cost criterion for each of their 

devices and both applicants maintained 

that their device meets the cost 

criterion. We summarize each analysis 

below. 

With regard to LUTONIX®, to 

demonstrate that the technology meets 

the cost criterion, the applicant 

performed three different analyses. The 

applicant first searched the FY 2013 

MedPAR data file that was used for the 

recalibration of the FY 2015 MS–DRG 

relative payment weights in the FY 2015 

IPPS/LTCH PPS final rule. The 

applicant applied the standard trims 

that CMS used when selecting cases for 

IPPS rate recalibration as described in 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 49911). In other words, the 

applicant included cases from IPPS 

hospitals and Maryland hospitals and 

excluded cases paid by Medicare 

Advantage plans, cases from hospitals 

that did not submit charges in a 

sufficiently broad range of revenue 

centers, and statistical outlier cases as 

described in the FY 2015 IPPS/LTCH 

PPS final rule. The applicant then 

searched for all claims reporting ICD–9– 

CM procedure code 39.50 (Angioplasty 

of other non-coronary vessel(s)) and also 

reporting at least one of the following 

seven ICD–9–CM diagnosis codes 

(440.20 (Atherosclerosis of native 

arteries of the extremities, unspecified), 

440.21 (Atherosclerosis of native 

arteries of the extremities with 

intermittent claudication), 440.22 

(Atherosclerosis of native arteries of the 

extremities with rest pain), 440.23 

(Atherosclerosis of native arteries of the 

extremities with ulceration), 440.24 

(Atherosclerosis of native arteries of the 

extremities with gangrene), 440.29 

(Other atherosclerosis of native arteries 

of the extremities), and 443.9 

(Peripheral vascular disease, 

unspecified indicating peripheral artery 

disease). The applicant excluded all 

claims that reported any ICD–9–CM 

procedure codes involving a stent. A 

total of 23,157 cases reporting 

peripheral angioplasty were identified. 

Of these 23,157 cases, MS–DRGs 252, 

253, and 254 (Other Vascular 

Procedures with MCC, with CC and 

without CC/MCC, respectively) 

accounted for 65 percent of cases; MS– 

DRGs 237 and 238 (Major 

Cardiovascular Procedures with MCC 

and without MCC, respectively), MS– 

DRGs 239 and 240 (Amputation for 

Circulatory System Disorders Except 

Upper Limb and Toe with MCC and 

with CC, respectively), and MS–DRG 

853 (Infectious and Parasitic Diseases 

with Operating Room Procedure with 

MCC) accounted for 17 percent of cases 

(among these, peripheral angioplasty 

was secondary to some other 

circulation-related procedure: a major 

cardiovascular procedure (MS–DRGs 

237 and 238), amputation due to poor 

circulation (MS–DRGs 239 and 240), or 

(typically) amputation with sepsis (MS– 

DRG 853)). The remaining 18 percent of 

cases were spread across a large number 

of other MS–DRGs. Next, the applicant 

obtained the average case-weighted 

charge per case based on the 

distribution of cases by MS–DRG and 

then identified the average caseweighted threshold for the three MS– 

DRG groupings from the threshold 

amounts in Table 10 of the FY 2015 

IPPS/LTCH PPS final rule. The 

applicant then calculated the 

unadjusted (unstandardized) average 

case-weighted charge per case for all 

MS–DRGs. According to the applicant, 

charges were not removed for any prior 

technology. To estimate the charge for 

the new technology, the applicant 

divided the projected cost per patient by 

the national average CCR for supplies 

(0.292) in the FY 2015 IPPS/LTCH PPS 

final rule, to arrive at the average caseweighted standardized charges per case. 

The average case-weighted standardized 

charges per case for the three primary 

MS–DRGs 252–254 group (65 percent), 

the five additional MS–DRGs 237–240 

and MS–DRG 853 group (17 percent), 

and the other MS–DRGs (18 percent) 

were $69,243, $81,156, and $95,138, 

respectively. The applicant then inflated 

the average standardized case-weighted 

charges per case from FY 2013 to FY 

2015 using the 2-year inflation factor of 

10.44 percent specified in the FY 2015 

IPPS/LTCH PPS final rule and added 

charges related to the new technology to 

the average case-weighted standardized 

charges per case, although the applicant 

indicated that it was not clear on the 

need to include an inflation factor. The 

final inflated average case-weighted 

standardized charges per case for the 

three primary MS–DRG groups (65 

percent), the five additional MS–DRG 

groups (17 percent), and across other 

MS–DRGs (18 percent) were $85,386, 

$98,543, and $104,052, respectively. 

Because the final inflated average caseweighted standardized charge amounts 

exceed the corresponding average caseweighted threshold amounts of $69,594, 

$74,449, and $75,215, respectively, 

using the FY 2015 IPPS Table 10, the 

applicant maintained that the 

LUTONIX® meets the cost criterion for 

new technology add-on payments. 

With regard to IN.PACTTM

AdmiralTM, to demonstrate that the 

technology meets the cost criterion, the 

applicant performed two different 

analyses. The applicant believed that a 

case involving an angioplasty procedure 

that used the IN.PACTTM AdmiralTM

drug-coated balloon catheter would map 

to the same MS–DRGs as a case 

involving a plain balloon angioplasty 

procedure, MS–DRGs 252, 253, and 254 

(Other Vascular Procedures with MCC, 

with CC, and without CC/MCC, 

respectively). The applicant first 

searched the FY 2013 MedPAR claims 

data that were used for the recalibration 

of the FY 2015 MS–DRG relative 

payment weights in the FY 2015 IPPS/ 

LTCH PPS final rule. The data in this 

file included discharges occurring on 

October 1, 2012 through September 30, 

2013. The applicant excluded claims for 

all discharges for Medicare beneficiaries 

enrolled in a Medicare Advantage plan. 

The applicant also limited claims to 

those hospitals that were included in 

the FY 2013 IPPS Final Rule Impact 

File. In addition, the applicant removed 

claims in accordance with the trims 

specified in the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53326) that were 

used to recalibrate the MS–DRG relative 

payment weights. The applicant then 

searched for all claims reporting ICD–9– 

CM procedure code 39.50 (Angioplasty 

of other non-coronary vessel(s)) in 

combination with claims reporting at 

least one of the following seven ICD–9– 

CM diagnosis codes (440.20 through 

440.24, 440.29, and 443.9) indicating 

peripheral artery disease. The applicant 

excluded all claims that reported any 

ICD–9–CM procedure codes for stent 

implantation. The applicant believed 

that excluding all cases reporting 

stenting procedures would potentially 

underestimate the average charges for 

cases reporting peripheral angioplasty. 

A total of 23,157 cases involving 

peripheral angioplasty procedures were 

identified. Of these 23,157 cases, a 

majority (65 percent; 15,040 cases) 

mapped to one of the 3 primary MS– 

DRGs, MS–DRGs 252, 253, or 254. The 

remaining 35 percent of the cases 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24450 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

39Scheinert, D., et al.: Prevalence and clinical 

impact of stent fractures after femoropopliteal 

stenting. J Am Coll Cardiol, 2005. 45(2): p. 312–5. 

40 Klein, A.J., et al.: Quantitative assessment of 

the conformational change in the femoropopliteal 

artery with leg movement. Catheter Cardiovasc 

Interv, 2009. 74(5): p. 787–98. 

(8,117) were assigned to a number of 

MS–DRGs other than the 3 primary MS– 

DRGs. Next, the applicant determined 

the distribution of cases by MS–DRG 

and the case-weighted threshold 

amounts from Table 10 in the FY 2015 

IPPS/LTCH PPS final rule, for both the 

primary MS–DRG group and the total 

MS–DRG group. The applicant began by 

calculating the unadjusted 

(unstandardized) case-weighted average 

charge per case for all MS–DRGs. 

Following this computation, the 

applicant standardized the charges on 

each of the identified claims using the 

FY 2013 factors from the FY 2015 IPPS/ 

LTCH PPS Final Rule Impact File, to 

match the year of the claims data used 

in this analysis (FY 2013 MedPAR file). 

According to the applicant, charges 

were not removed for any other specific 

technologies that may have been used 

because the applicant expected that a 

plain balloon will be utilized to 

predilate the vessel in a majority of 

drug-coated balloon angioplasty cases 

prior to the use of the drug-coated 

balloon (that is, the applicant did not 

believe it was necessary to remove 

charges associated with the other 

specific prior technology (a plain PTA 

balloon catheter in this case). The 

applicant then inflated the average caseweighted standardized charges per case 

from FY 2013 to FY 2015 using the 2- 

year inflation factor of 10.44 percent 

specified in the FY 2015 IPPS/LTCH 

PPS final rule and added charges related 

to the new technology to the average 

charges per case. The final inflated 

average case-weighted standardized 

charge per case both for the primary 

MS–DRGs group and the total MS–DRG 

group were $82,944 and $101,611, 

respectively. Because the final inflated 

average case-weighted standardized 

charge per case for the applicable MS– 

DRG exceeds the average case-weighted 

threshold amounts of $69,594 and 

$75,215, respectively, using the FY 2015 

IPPS Table 10, the applicant maintained 

that the IN.PACTTM AdmiralTM

technology meets the cost criterion for 

new technology add-on payments. 

We are concerned that both applicants 

excluded cases of patients that received 

stent implantations from their analysis 

because the applicants believed that 

their technology can be used instead of 

stenting. We are seeking public 

comments on whether LUTONIX® and 

IN.PACTTM AdmiralTM meet the cost 

criterion. 

With regard to substantial clinical 

improvement, the applicant believed 

that LUTONIX® represents a substantial 

clinical improvement because it meets 

an unmet clinical need by providing 

access to ‘‘no stent zones’’ and because 

it can achieve greater patency; preserve 

the flexibility of future interventions; 

and address stent fractures and restenosis.39 40

The applicant shared the findings 

from its LEVANT 1 and LEVANT 2 

trials. 

LEVANT 1: In the LEVANT 1 trial, 

101 patients were randomized to a 

LUTONIX® drug-coated balloon 

treatment group or a control group that 

received percutaneous transluminal 

angioplasty (PTA) only. The primary 

endpoint of mean angiographic Late 

Lumen Loss at 6 months favored the 

LUTONIX® drug-coated balloon 

treatment group (0.46±1.13) compared 

to the control PTA group (1.09±1.07), 

with a p-value of 0.016. 

We are concerned that the results 

were not statistically significant with 

regard to the p-value documented. 

Adverse events were similar for both 

groups and through 24 months; the 

percentage of patients with any death, 

amputation, or target vessel thrombosis 

was 8 percent in the treatment group 

compared to 12 percent in the control 

group. 

LEVANT 2: The LEVANT 2 study is 

the applicant’s pivotal study that was 

conducted as a prospective, multicenter, 

single blind, 2:1 (test: control) 

randomized trial comparing the 

LUTONIX® drug-coated balloon 

angioplasty to standard balloon 

angioplasty used during the treatment of 

patients with femoropopliteal arteries. 

The applicant documented that the 

patient characteristics and lesions in 

both groups were well-matched; 43 

percent of patients were diabetic; 35 

percent were current smokers; 37 

percent were female; and 8 percent had 

critical limb ischemia. 

The study was conducted to show 

that drug-coated balloon angioplasty 

improves clinical outcomes for a patient 

population as compared to currently 

available treatments. All endpoints were 

adjudicated by a blinded Clinical Events 

Committee (CEC) and duplex ultrasound 

and angiographic core laboratories. 

The applicant specified two primary 

endpoints that must both be met in 

order for the study to be successful. The 

first endpoint was primary patency at 12 

months, defined as freedom from target 

lesion restenosis and target lesion 

revascularization (TLR). The results 

were the following: primary patency for 

LUTONIX® was 65.2 percent compared 

to primary patency of 52.6 percent for 

PTA. Kaplan-Meier analysis was 73.5 

percent for LUTONIX® compared to 

56.8 percent for PTA (p <0.001). The 

second primary efficacy endpoints were 

composite safety endpoints at 12 

months, which included freedom from 

index-limb amputation; reintervention 

and related death. The results were 83.9 

percent for LUTONIX® compared to 

79.0 percent for PTA. 

The secondary efficacy endpoints at 

12 months for this trial were freedom 

from Target lesion revascularization 

(TLR), and the results were 89.7 percent 

for the LUTONIX® treatment group 

compared to 84.8 percent for the PTA 

control group, with p = 0.17. Another 

end point was freedom from Target 

vessel revascularization (TVR), where 

the result for the LUTONIX® treatment 

group was 76.2 percent compared to 

66.6 percent in the control group with 

a p-value of 0.041. Clinical indicators, 

such as Ankle brachial index (ABI), 

Rutherford scores (categorization of 

symptomology), quality of life (QOL), 

walking distance, and walking 

impairment WIQ, were significantly 

improved with a p-value of <0.001. The 

applicant assessed the primary safety 

endpoint using Kaplan-Meier survival 

analysis and stated that there was no 

evidence of statistical difference. 

We are concerned that the patient 

population studied may not reflect the 

Medicare population. In particular, we 

note that only 37 percent of the studied 

patients were female. For instance, it 

could be beneficial to see additional 

subgroup analyses to test for statistical 

interaction between treatment and 

subgroups to ascertain that there is no 

imbalance in response to different 

subpopulations, such as males versus 

females. 

With regard to substantial clinical 

improvement for the IN.PACTTM

AdmiralTM, the applicant stated that 

evidence demonstrates that the 

technology significantly improves key 

clinical outcomes compared to previous 

technologies for patients with 

intermittent claudication. Examples of 

such key clinical outcomes included a 

decrease in recurrence of restenosis 

(disease process); a decrease in rates of 

repeat interventions (subsequent 

therapeutic interventions); a decrease in 

future hospitalizations; improved 

patient symptoms (decreased pain), and 

improvement in quality of life and 

function. To further demonstrate 

substantial clinical improvement, the 

applicant asserted that historical proofof-concept research has demonstrated 

the utility of various drug-coated 

balloon technologies in reducing 

restenosis and reintervention compared 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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41Werk M, Albrecht T, Meyer DR, Ahmed MN, 

Behne A, Dietz U, Eschenbach G, Hartmann H, 

Lange C, Schnorr B, Stiepani H, Zoccai GB, 

Ha ̈nninen EL.: Paclitaxel-coated balloons reduce 

restenosis after femoropopliteal angioplasty: 

evidence from the randomized PACIFIER trial. Circ 

Cardiovasc Interv 2012 5: 831–40. 

42Tepe G, Zeller T, Albrecht T, Heller S, 

Schwarzwa ̈lder U, Beregi JP, Claussen CD, 

Oldenburg A, Scheller B, Speck U.: Local delivery 

of paclitaxel to inhibit restenosis during angioplasty 

of the leg. N Engl J Med 2008; 358: 689–99. 

43Hirsch AT, Haskal ZJ, Hertzner NR, et al.: ACC/ 

AHA guidelines for the management of subjects 

with peripheral arterial disease (lower extremity, 

renal, mesenteric, and abdominal aorta): executive 

summary. J Am Coll Cardiol 2006;47:1239–312. 

44Werk M, Langner S, Reinkensmeier B, 

Boettcher HF, Tepe G, Dietz U, Hosten N, Hamm 

B, Speck U, Ricke J.: Inhibition of restenosis in 

femoropopliteal arteries: paclitaxel-coated versus 

uncoated balloon: femoral paclitaxel randomized 

pilot trial. Circulation 2008;118: 1358–65. 

45 Jones WS, Schmit KM, Vemulapalli S, 

Subherwal S, Patel MR, Hasselblad V, Heidenfelder 

BL, Chobot MM, Posey R, Wing L, Sanders GD, 

Dolor RJ.: Treatment Strategies for Patients With 

Peripheral Artery Disease. Comparative 

Effectiveness Review No. 118. (Prepared by the 

Duke Evidence-based Practice Center under 

Contract No. 290–2007–10066–I.) AHRQ 

Publication No. 13–EHC090–EF. Rockville, MD: 

Agency for Healthcare Research and Quality; May 

2013. Available at: http:// 

www.effectivehealthcare.ahrq.gov/reports/final. 

with PTA.41 42 With this assertion, the 

applicant stated that there was no 

evidence of the promising primary 

patency and target lesion 

revascularization rates from large 

randomized controlled trials. This led 

the applicant to design the IN.PACTTM

SFA Trial. The IN.PACTTM SFA Trial is 

a prospective, randomized-controlled, 

global, multicenter, single-blinded study 

conducted with independent, blinded 

adjudication of all key endpoints. The 

primary safety end point was freedom 

from device-related and procedurerelated death through 30 days, and 

freedom from target limb major 

amputation and clinically-driven TVR 

through 12 months. The primary 

effectiveness endpoint was primary 

patency, a composite endpoint 

comprising an anatomic measure 

(binary restenosis as measured by 

duplex ultrasound or angiography) and 

a clinical measure (Clinically Driven 

Target Lesion Revascularization (CD– 

TLR)). The IN.PACTTM SFA Trial was 

designed as a two-phase, global, 

multicenter trial in which 331 patients 

with symptoms of claudication or rest 

pain and with a positive diagnostic 

finding of de novo stenosis and/or nonstented restenotic lesions in the SFA 

and/or popliteal artery (PPA) were 

randomized in a 2:1 fashion to treatment 

with IN.PACTTM Admiral TM drugcoated balloon or uncoated balloon 

angioplasty. The trial was prospectively 

designed to be conducted in two phases: 

IN.PACTTM SFA Phase I (conducted in 

Europe) and IN.PACTTM SFA Phase II 

(conducted in the United States), jointly 

referred to as IN.PACTTM SFA Trial. 

According to the applicant, the patient 

demographics were well-matched and of 

which 34 percent were women. We are 

concerned that the applicant did not 

match the gender variable. The 

applicant noted that, during the SFA 

Trial, both the study subjects and trial 

sponsor were blinded to the treatment 

assignments through completion of the 

12-month primary endpoint evaluations. 

The applicant also stated that the 

independent Clinical Events Committee 

and the Core Laboratories were blinded 

to the treatment assignment and the 

duration of the follow-up of study 

participants. In addition, operators 

(implanting physicians and 

catheterization laboratory staff, 

including research coordinators) were 

not blinded to the treatment delivered 

due to macroscopic visual differences 

between IN.PACTTM AdmiralTM drugcoated balloon and control technology. 

The applicant reported the following: 

The primary endpoints were: Improved 

primary patency rates in the IN.PACTTM

AdmiralTM drug-coated balloon arm 

compared to the control arm; and 

primary patency within 12 months is 

defined as freedom from clinically 

driven target lesion revascularization 

and freedom from restenosis as 

determined by duplex ultrasonography 

peak systolic velocity ratio ≤2.4 or ≤50 

percent stenosis as assessed by 

angiography. Results showed that the 

12-month primary patency rate was 82.2 

percent in the IN.PACTTM AdmiralTM

drug-coated balloon arm versus 52.4 

percent in the PTA arm (P <0.001). In 

addition, the 12-month freedom from 

binary restenosis (assessed by DUS/ 

angiography) was 83.5 percent in the 

IN.PACTTM AdmiralTM drug-coated 

balloon group compared to 66.3 percent 

in the PTA group (P = 0.001). The 

second endpoint measured was AnkleBrachial Index (ABI) showing 0.951 in 

the IN.PACTTM AdmiralTM drug-coated 

balloon arm compared to 0.866 in the 

control arm, P = 0.002. The ABI is an 

objective hemodynamic measure used to 

predict the severity of PAD in the lower 

extremity. The test is done by 

comparing the systolic blood pressure at 

the ankle and the systolic blood 

pressure in the arm while a person is at 

rest. In general, higher values are better 

than lower values; a normal resting 

ankle-brachial index is from 1.0 to 1.4, 

an abnormal resting ankle-brachial 

index is 0.9 or lower and an ABI of 0.91 

to 0.99 is considered borderline 

abnormal.43 Secondary endpoints were 

primary sustained clinical 

improvement, defined as freedom from 

target limb amputation, target vessel 

revascularization, and increase in 

Rutherford class; comparing IN.PACTTM

AdmiralTM with the control arm was 

85.2 percent versus 68.9 percent; 

P <0.001. The rate of repeat target lesion 

revascularization (TLR), defined by the 

applicant as repeat revascularization of 

the target lesion by percutaneous 

endovascular treatment or bypass 

surgery, was 2.4 percent in the 

IN.PACTTM AdmiralTM drug-coated 

balloon arm compared to 20.6 percent in 

the control arm. In addition, the target 

vessel revascularization (TVR) 

procedures (that is, any 

revascularization done to any segment 

of the entire target vessel that may 

reflect restenosis of a target lesion or 

disease progression causing a new 

lesion in the target artery) 44 was 4.3 

percent in the IN.PACTTM AdmiralTM

drug-coated balloon arm compared to 

23.4 percent in the control arm with a 

p-value of <0.001). 

Other secondary endpoints were 

conducted and the patients were 

followed at 1, 6, and 12 months to 

assess the following claudication 

symptoms: EQ–5D; Walking Impairment 

Questionnaire (WIQ); 6-minute walk test 

in a subset. Claudication symptoms 

were 7.3 percent in the IN.PACTTM

AdmiralTM drug-coated balloon arm 

compared to 20.7 percent in the control 

arm. For WIQ (defined as the ability of 

PAD patients to walk defined distances 

and speeds, plus climb stairs, thus 

evaluating claudication severity 

levels 45), the gains in improvement 

were similar in both groups. The 6- 

minute walk test, which is a measure of 

functional exercise capacity, was 

equivocal in both arms. Quality of life 

(QOL) was measured using five domains 

of the EQ–5D (mobility, self-care, usual 

activities, pain/discomfort, and anxiety/ 

depression) and was found to be 

equivocal. 

The applicant also conducted 

extensive subgroup analyses of the 

primary safety end point, efficacy 

endpoint, and TLR rates to assess the 

response to IN.PACTTM AdmiralTM in 

various subpopulations, including: 

Rutherford category (2, 3, and 4); 

diabetes; age (≥75); lesion length (<5 cm, 

≥5 cm to <10 cm, ≥10 cm to <18 cm); 

total occlusion, and gender. According 

to the applicant, although the trial was 

not designed to power the subgroup 

analyses, in 9 of these 11 subgroups, 

patients in the IN.PACTTM AdmiralTM

treatment group were shown to have 

statistically significant better outcomes 

than patients in the PTA control group 


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24452 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

46 Goodney, Tarulli, Faerber, et al. Fifteen-Year 

Trends in Lower Limb Amputation, 

Revascularization, and Preventive Measures Among 

Medicare Patients. JAMA Surg. 2015;150(1):84–86. 

in the primary effectiveness and safety 

endpoints as well as clinically-driven 

TLR. This includes subgroups: 

Rutherford categories 2 & 3; diabetes; 

age (≥75); lesion length ≥5 cm to <10 

cm; lesion length ≥10 cm to <18 cm; 

total occlusion; and gender (both male 

and female). In the two subgroups that 

did not meet statistical significance 

(Rutherford category 4 and lesion length 

<5 cm), data for the primary 

effectiveness and safety endpoints as 

well as the clinically driven TLR 

trended in favor of IN.PACTTM

AdmiralTM. 

We are concerned about the clinical 

meaningfulness of some of the 

endpoints measured by the trials 

conducted by the applicant. For 

example, there were no changes in 

functional measures such as walking 

distances. The applicant indicated that 

this may be because patients in the 

control group had additional procedures 

to the point their symptoms were 

controlled to the same extent as those of 

the drug-coated balloon group. We 

believe that this assertion could be 

better supported with data. Another 

related example is the higher anklebrachial index in the drug-coated 

balloon catheter group. While this is 

also consistent with an enduring 

physiologic effect of the drug-coated 

balloon device, we are concerned that 

these ABI measurements appear to have 

been made by unblinded study 

personnel. 

We are concerned that the IN.PACTTM

AdmiralTM technology may not be the 

optimal treatment for all patients 

diagnosed with peripheral arterial 

disease. The drug-coated balloon 

catheter has been compared only with a 

standard balloon, and no other 

alternatives, such as stents, surgery, or 

intensive exercise therapy. Therefore, it 

is unknown whether a drug-coated 

balloon strategy would yield the same, 

better, or worse outcomes than these 

alternatives. We also note that while 

there appears to be broader anatomical 

applicability, not all of the studies 

provided definitively indicate that it is 

a clinical improvement over PTA. 

We are seeking public comment on 

whether LUTONIX® and IN.PACTTM

AdmiralTM meet the substantial clinical 

improvement criterion, specifically with 

regard to our concerns discussed. 

Below we summarize the written 

public comments on the LUTONIX® and 

IN.PACTTM AdmiralTM technologies that 

we received in response to the town hall 

meeting. 

Comment: One commenter, a major 

society on vascular medicine, stated that 

without new technology add-on 

payments for drug-coated balloon 

catheters, facilities will not be 

adequately compensated for procedures 

involving these devices and patient 

access to these new beneficial 

technologies will be hampered. The 

commenter believed that the technology 

being developed by both manufacturers 

meets the newness criterion. The 

commenter stated that the drug-coated 

balloon catheters represent 

advancement in medical technology that 

substantially improves, relative to 

technologies previously available, the 

treatment of Medicare beneficiaries. 

Specifically, the commenter stated that 

the results of the clinical trials for these 

devices have established that these 

devices achieve more durable patency 

by reducing restenosis, which in turn 

reduces the rate of repeat interventions. 

The commenter further stated that these 

devices do not require a permanent 

implant, which preserves future 

treatment options. The commenter also 

noted documented improvements 

treatment results for patients diagnosed 

with PAD according to an article in the 

JAMA.46 The commenter expressed 

support for approval of new technology 

add-on payments for both the 

LUTONIX® and the IN.PACTTM

AdmiralTM technologies, with hopes of 

minimizing any financial barriers that 

might prevent patients from having 

access to this technology. 

Another commenter supported the 

approval of new technology add-on 

payments for the LUTONIX® and 

IN.PACTTM AdmiralTM technologies and 

for other drug-coated balloon catheters 

in the treatment of patients diagnosed 

with SFA in the United States. 

Specifically, the commenter stated that 

the clinical study results have shown 

that using drug-coated balloon catheters 

both keep a vessel open for a longer 

period of time and reduce the total 

number of repeat procedures that may 

need to be performed. The commenter 

further stated that treatment using 

existing therapies in his own practice 

have resulted in patients returning for 

repeat procedures 1 to 2 times per year. 

The commenter noted that the 

additional benefit of reducing 

revascularization, which allows patients 

to remain mobile for longer periods of 

time, further reduces potential 

complications and hospitalizations. 

The commenter also noted that 

colleagues outside the United States 

have had access to this technology for 

over 5 years and the technology’s use 

has shown positive results in different 

patient and lesion subgroups, which 

provides strong evidence that supports 

the wide use of drug-coated balloon 

catheters. The commenter stated that 

there are a number of publications that 

advocate that the reduced need for 

revascularization also results in 

significant cost savings for health care 

systems, and recommended that these 

additional savings and value to be 

shared with hospitals in the United 

States. The commenter stated that, 

although there is clear clinical evidence 

that supports the use of drug-coated 

balloon catheters, there are concerns 

that hospital administrators may limit 

the use of these catheters because of the 

added cost burden that would be 

completely imposed on hospitals in the 

current health care system. 

Response: We appreciate the 

commenters’ input. We will consider 

these comments in our analysis and 

final determination of the applications 

for new technology add-on payments for 

FY 2016. 

h. VERASENSETM Knee Balancer 

System (VKS) 

OrthoSensor submitted an application 

for new technology add-on payments for 

the VERASENSETM Knee Balancer 

System (VKS) for FY 2016. The VKS is 

a sterile, single patient use device to 

intraoperatively provide a means to 

dynamically balance the patient’s knee 

during total knee arthroplasty (TKA) 

surgery. The applicant maintained that 

quantitative metrics, viewed on a 

monitor through real time wireless 

information, enable the surgeon to 

improve soft tissue stability and kinetics 

during TKA surgery. The VKS device 

includes a tibial trial insert composed of 

an array of responsive sensors that 

delivers quantified kinetic balance data 

during TKA surgery. The quantitative 

data provides a basis for the surgeon to 

make data-based decisions regarding 

tissue dissection during TKA surgeries, 

resulting in a more stable outcome. 

According to the applicant, the VKS 

device combines dual sensor elements, 

coupled with micro-processing 

technology, to accurately depict intraarticular kinetics and contact point 

locations within the knee. The tibial 

trial insert is placed in the knee capsule. 

Proper placement of the insert does not 

require any force or infiltration of the 

bone or soft tissue in the knee. The 

applicant stated that the VKS device 

uses wireless communication protocols 

that overcome line-of-sight or other 

interference issues, therefore 

eliminating the need for line-of-sight or 

direct antenna-based tracking during the 

TKA surgery. 


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The first version of the VKS received 

FDA approval in 2009 for the OrthoRex 

Intra-Operative Load Sensor. The device 

was indicated for use as a tool to adjust 

the femoral knee implant to reduce 

instability from flexion gap asymmetry 

using a single patient use sterile force 

sensor. The applicant noted that the first 

version of the VKS was not available on 

the U.S. market at the time of FDA 

approval in 2009. The applicant stated 

that the 510K approval from the FDA 

allowed permission to continue to test 

the device and improve upon the 

specificity of the sensors. The applicant 

stated that the first version of the VKS 

did not enter on the U.S. market until 

late 2011. Further advancements were 

made to the VKS to more accurately 

refine the sensor specificity, which 

provides more accurate balance data 

unique to the contours of specific knee 

implant components. The applicant 

further explained that the tibial trial 

sensor was redesigned to respond 

quantitatively and specifically to the 

variations of the contours of specifically 

manufactured knee implants. The 

advanced sensor specificity, developed 

in conjunction with data gained from 

clinical trials, provides information 

regarding force and balance metrics that 

aid the surgeon’s understanding and 

measurement of knee balance. The 

applicant noted that without the 

advancements to the sensor specificity, 

which were perfected based on 

knowledge gained from the clinical 

trials, the sensor would not be as 

clinically useful as it is currently. These 

advancements resulted in additional 

FDA clearances on June 13, 2013, and 

October 14, 2013. The product’s 

description was updated on January 28, 

2014. 

The applicant maintained that the 

VKS meets the newness criterion. The 

applicant analyzed the relative weights 

from 2010 to 2014 for the MS–DRGs that 

may contain cases that would be eligible 

for the advanced VKS technology (MS– 

DRGs 461 through 470). The applicant 

noted that there was no increase in the 

calculation of the FY 2014 or FY 2015 

relative weights for these MS–DRGs to 

represent the additional cost of the 

advanced VKS technology. 

We are concerned that the 

advancements made to the VKS that 

resulted in the additional FDA approval 

clearances in 2013 may not be 

significant enough to distinguish the 

advanced technology from the first 

version of the VKS, which received FDA 

approval in 2009. We believe that the 

advanced VKS may be substantially 

similar to the first version of the VKS 

(that was first available on the U.S. 

market in late 2011) and, therefore, 

would not meet the newness criterion. 

In addition, the costs associated with 

the VKS should be reflected in the FY 

2013 and subsequent relative payment 

weights for these MS–DRGs because the 

product has been available and used for 

the Medicare population since 2011. 

In the FY 2010 IPPS/RY 2010 LTCH 

PPS final rule (74 FR 43813 through 

43814), we established criteria for 

evaluating whether a new technology is 

substantially similar to an existing 

technology, specifically: (1) Whether a 

product uses the same or a similar 

mechanism of action to achieve a 

therapeutic outcome; (2) whether a 

product is assigned to the same or a 

different MS–DRG; and (3) whether the 

new use of the technology involves the 

treatment of the same or similar type of 

disease and the same or similar patient 

population. If a technology meets all 

three of the criteria, it would be 

considered substantially similar to an 

existing technology and would not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. 

In evaluating the application under 

the substantial similarity criteria, we 

believe that the first version of the VKS 

and the advance version of the VKS use 

the same mechanism of action to 

achieve the desired outcome by using a 

sterile device that is equipped with 

sensors used to adjust the femoral knee 

implant to reduce instability from 

flexion gap asymmetry. In addition, we 

believe that cases involving the first 

version of the VKS would be assigned 

to the same MS–DRG as the cases 

involving the advanced VKS. Moreover, 

we believe that both the first version of 

the VKS and the advanced version of 

the VKS treat the same or similar 

disease and the same or similar patient 

population. Specifically, both of the 

VKS technologies are used in the 

treatment of patients undergoing TKA 

surgery. Because we believe that the 

technology meets all three of the 

substantial similarity criteria, we 

believe that the beginning of the 

newness period for this technology 

would commence when it became 

available on the U.S. market in late 

2011. Therefore, the VKS may not be 

considered ‘‘new’’ for purposes of new 

technology add-on payments. 

As discussed in the FY 2005 IPPS 

final rule (69 FR 49003), once data 

become available to reflect the cost of 

the technology in the relative weights, 

the technology can no longer be 

considered ‘‘new’’ and eligible to 

receive new technology add-on 

payments. Section 412.87(b)(2) states 

that a medical service or technology 

may be considered new within 2 or 3 

years after the point at which data begin 

to become available reflecting the ICD– 

9–CM code assigned to the new service 

or technology (depending on when a 

new code is assigned and data on the 

new service or technology become 

available for DRG recalibration). 

Further, after CMS has recalibrated the 

DRGs, based on available data, to reflect 

the costs of an otherwise new medical 

service or technology, the medical 

service or technology will no longer be 

considered ‘‘new’’ under the criterion of 

this section. Therefore, we believe that 

the costs of this technology are included 

in the charge data and the MS–DRGs 

have been recalibrated using that data. 

Therefore, the technology can no longer 

be considered ‘‘new’’ for the purposes of 

this provision, regardless of whether or 

not there was an increase in the MS– 

DRG relative weights during FYs 2014 

and 2015, specifically because of the 

inclusion of the cost of the technology. 

As previously stated, we believe that 

the beginning of the newness period for 

the VKS commenced when the product 

was first made available on the U.S. 

market in late 2011. The 3-year 

anniversary date of the product’s 

availability on the U.S. market occurred 

in late 2014, which is prior to the 

beginning of FY 2016. Therefore, we do 

not believe that the VKS technology can 

be considered ‘‘new’’ for purposes of 

new technology add-on payments. We 

are inviting public comments regarding 

whether or not the VKS technology is 

substantially similar to existing 

technologies, and whether or not the 

VKS technology meets the newness 

criterion. 

Currently, there are no ICD–9–CM or 

ICD–10–PCS procedure codes that 

uniquely identify the use of this 

technology. As stated above, effective 

October 1, 2015 (FY 2016), the ICD–10 

coding system will be implemented. 

The applicant submitted a request for a 

unique ICD–10–PCS code that was 

presented at the March 18, 2015 ICD–10 

Coordination and Maintenance 

Committee meeting. If approved, the 

code(s) will be effective on October 1, 

2015 (FY 2016). More information on 

this request can be found on the CMS 

Web site located at the following link: 

http://www.cms.gov/Medicare/Coding/

ICD9ProviderDiagnosticCodes/ICD-9- 

CM-C-and-M-Meeting-Materials.html. 

With regard to the cost criterion, the 

applicant supplied three analyses to 

demonstrate that it meets the cost 

criterion. The applicant believed that 

cases that are eligible for the VKS 

technology map to MS–DRGs 461 and 

462 (Bilateral or Multiple Major Joint 

Procedures of Lower Extremity with 

MCC and without MCC, respectively), 

MS–DRGs 466 through 468 (Revision of 


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47Memtsoudis SG, Valle AGD, Besculides MC, 

Gaber, Sculco TP.: In-hospital complications and 

mortality of unilateral, bilateral, and revision TKA. 

2008, Clin Orthop Relat Res, 466:2617–2627. 

Hip or Knee replacement with MCC, 

with CC, and without CC/MCC, 

respectively), and MS–DRGs 469 and 

470 (Major Joint Replacement or 

Reattachment of Lower Extremity with 

MCC and without MCC, respectively). 

The first analysis used data from the 

2012 National Inpatient Sample (NIS) 

from the Agency for Research and 

Quality (AHRQ). We note that the NIS 

includes Medicare, Medicaid, and 

commercial and uninsured claims data. 

However, the applicant limited its 

search to Medicare cases only. 

The applicant searched for all 

Medicare cases assigned to MS–DRGs 

461 and 462 and found 812 and 14,200 

cases respectively (for a total of 15,012 

cases). The applicant noted that the 

15,012 cases assigned to MS–DRGs 461 

and 462 also include cases representing 

hip revision procedures. Therefore, to 

determine the number of eligible cases 

reporting bilateral knee revisions 

assigned to MS–DRGs 461 and 462, 

based on clinical information,47 the 

applicant approximated that 4 percent 

of the cases assigned to MS–DRGs 461 

and 462 represent Medicare 

beneficiaries who may be eligible for the 

VKS for a bilateral knee revision 

procedure. As a result, the applicant 

focused its analysis on 32 cases assigned 

to MS–DRG 461 (812 cases * .04), and 

568 cases assigned to MS–DRG 462 

(14,200 cases * .04). We are concerned 

that the statistical data obtained from 

clinical information that the applicant 

used to determine the percentage of 

cases representing bilateral knee 

revisions still includes cases 

representing hip revision procedures. 

Specifically, the applicant did not 

uniquely identify cases representing 

bilateral knee revisions and only 

produced a percentage of all cases that 

still includes cases for hip revision 

procedures. 

According to the applicant, eligible 

cases for the VKS technology include 

cases representing knee revision 

procedures that also map to MS–DRGs 

466 through 468 (which represent 

degrees of severity calculated for each 

MS–DRG). To determine the number of 

eligible cases reporting knee revision 

procedures assigned to MS–DRGs 466 

through 468, the applicant first searched 

the NIS database for the total number of 

Medicare cases assigned to these MS– 

DRGs. This resulted in a total of 54,105 

cases. The applicant noted that MS– 

DRGs 466 through 468 also include 

cases for hip and knee revision 

procedures. Therefore, to determine the 

number of cases representing knee 

revision procedures in each of these 

three MS–DRGs, the applicant first 

divided the number of Medicare cases 

for each MS–DRG (5,195 for MS–DRG 

466, 28,650 for MS–DRG 467, and 

20,260 for MS–DRG 468) by the total 

number of Medicare cases assigned to 

MS–DRGs 466, 467, and 468 (54,105). 

The applicant then multiplied the 

percentage for each MS–DRG (9.6 

percent for MS–DRG 466, 52.9 percent 

for MS–DRG 467, and 37.4 percent for 

MS–DRG 468) by the total amount of 

cases assigned to each MS–DRG. Based 

on this calculation, the applicant 

approximated the following number of 

cases representing knee revision 

procedures assigned to each of these 

three MS–DRGs: 3,054 cases in MS– 

DRG 466; 16,842 in MS–DRG 467; and 

11,910 in MS–DRG 468. We are 

concerned that the methodology the 

applicant used to determine the 

percentage of cases representing knee 

revision procedures still includes cases 

representing hip revision procedures. 

Specifically, in its methodology, the 

applicant did not use any source of 

statistical relevance to isolate cases 

representing knee revision procedures. 

Rather, the applicant used the 

percentage of Medicare cases assigned 

to each MS–DRG of the overall total 

cases for the three MS–DRGs, which 

includes knee and hip revisions, and 

multiplied by this percentage to further 

reduce the total number of cases. We do 

not believe that this further reduction to 

the total number of Medicare cases has 

sufficiently isolated cases representing 

knee revision procedures. 

According to the applicant, eligible 

cases for the VKS technology also 

include TKA procedures that map to 

MS–DRGs 469 and 470. To determine 

the number of eligible cases reporting 

TKA procedures assigned to MS–DRGs 

469 and 470, the applicant first searched 

the NIS database for the total number of 

Medicare cases assigned to these MS– 

DRGs. This resulted in 35,740 cases in 

MS–DRG 469 and 547,955 cases in MS– 

DRG 470. The applicant noted that MS– 

DRGs 469 and 470 also include cases 

representing hip replacement and other 

joint replacement procedures. 

Therefore, in order to determine the 

number of TKA procedures within these 

MS–DRGs, the applicant searched the 

NIS database for cases reporting ICD–9– 

CM procedure codes that typically map 

to these MS–DRGs. The applicant first 

searched for cases representing TKA 

across all MS–DRGs that reported ICD– 

9–CM procedure code 81.54 (Total knee 

replacement) and found 336,050 cases. 

The applicant then searched the NIS 

database for cases representing hip and 

other joint replacement procedures 

across all MS–DRGs that reported ICD– 

9–CM procedure codes 81.51 (Total hip 

replacement), 81.52 (Partial hip 

replacement), 81.56 (Total ankle 

replacement), 81.57 (Replacement of 

joint of foot and toe), and 81.59 

(Revision of joint replacement of lower 

extremity, not elsewhere classified) and 

found 238,050 cases. This resulted in a 

total of 574,100 cases representing knee, 

hip, and other joint replacement 

procedures. 

The applicant then divided the 

number of cases representing TKA 

procedures by the total number of cases 

(336,050/574,100) and determined that 

58.5 percent of all cases assigned to 

MS–DRGs 469 and 470 are related to 

TKA procedures. The applicant then 

multiplied the percent of cases 

representing TKA procedures (58.5 

percent) by the number of cases 

assigned to MS–DRGs 469 and 470, 

which resulted in 20,920 cases in MS– 

DRG 469 (35,740 * .585) and 320,746 

cases in MS–DRG 470 (547,955 * .585). 

We are concerned that the methodology 

the applicant used to determine the 

percentage of cases representing TKA 

procedures still includes cases 

representing hip and other joint 

replacement procedures. Specifically, 

the applicant did not uniquely identify 

cases representing TKA procedures and 

only produced a percentage of all cases, 

which still includes cases representing 

hip and other joint replacement 

procedures. 

Based on the analysis above, the 

applicant maintained that the total 

number of cases across MS–DRGs 461 

and 462 and MS–DRGs 466 through 470 

was 374,071. The applicant determined 

an average case-weighted charge per 

case of $57,341. The applicant then 

determined that it was necessary to 

remove charges related to the other 

computer-assisted devices/technologies 

used during these procedures and 

charges for operating room time because 

procedures involving the VKS do not 

require operating room time, and the 

charges for the VKS technology would 

inevitably be different. Therefore, the 

applicant removed approximately $146 

from the average case-weighted charge 

per care for cases assigned to MS–DRGs 

461 and 462, and $73 from the average 

case-weighted charge per case for cases 

assigned to MS–DRGs 466 through 470. 

The applicant noted that the $146 in 

charges removed from the average caseweighted charges per case for cases 

assigned to MS–DRGs 461 and 462 was 

slightly higher than the charges 

removed from cases assigned to MS– 


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DRGs 466 through 470 because these 

charges were for bilateral procedures 

which require additional operating 

room time. 

Data from the NIS database is only 

available on a national level and not on 

a hospital-specific level. Therefore, in 

order to standardize the charges per 

case, the applicant used the FY 2012 

IPPS Impact File and the mean value of 

all relevant standardization factors to 

standardize the charges per case. We are 

concerned that the analysis provided by 

the applicant did not use hospitalspecific data and, therefore, the 

standardization process may be 

inaccurate because of the use of mean 

factors rather than hospital-specific 

factors. By using mean factors rather 

than hospital-specific factors, we 

believe that the standardization 

performed by the applicant does not 

sufficiently take into account hospital 

variations. 

The applicant then inflated the 

charges using an inflation factor of 

10.4227 percent based on the inflation 

factor in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50379), and added the 

charges related to the VKS technology to 

the adjusted average case-weighted 

standardized charge per case. This 

resulted in a final inflated average caseweighted standardized charge per case 

of $68,121. Using the FY 2015 IPPS 

Table 10 thresholds, the applicant 

determined that average case-weighted 

threshold amount for MS–DRGs 461 and 

462 and MS–DRGs 466 through 470 is 

$57,341. Because the final inflated 

average case-weighted standardized 

charge per case for the applicable MS– 

DRGs exceeds the average case-weighted 

threshold amount, the applicant 

maintained that the technology meets 

the cost criterion. 

The applicant’s second analysis used 

data from the 2013 American Hospital 

Discharge Data (AHD) based on 57 

randomly selected hospitals. The 

applicant searched the data and did not 

find any cases assigned to MS–DRG 461. 

The applicant noted that it used a value 

of 10 cases for its analysis of cases 

assigned to MS–DRG 461 because data 

reflecting a zero value indicates that the 

hospital performed less than 10 

procedures. The applicant found 533 

cases assigned to MS–DRG 462. To 

determine the number of cases 

representing bilateral knee revision 

procedures in MS–DRG 462, similar to 

the first analysis, the applicant 

multiplied the total number of cases 

assigned to MS–DRG 462 by 4 percent, 

which resulted in 21 cases. Similar to 

our statement about the first analysis, 

we are concerned that the applicant did 

not uniquely identify cases representing 

bilateral knee revision procedures and 

only produced a percentage of all cases, 

which still includes cases representing 

hip revision procedures. 

To determine the number of eligible 

cases reporting knee revision 

procedures assigned to MS–DRGs 466 

through 468, the applicant first searched 

the AHD database for the total number 

of cases assigned to these MS–DRGs. 

This resulted in a total of 2,969 cases. 

Because these MS–DRGs include cases 

representing hip and knee revision 

procedures, to determine the number of 

cases representing knee revision 

procedures in each of these three MS– 

DRGs, the applicant first divided the 

number of cases for each MS–DRG (122 

for MS–DRG 466; 1,746 for MS–DRG 

467; and 1,101 for MS–DRG 468) by the 

total number of cases in MS–DRGs 466 

through 468 (2,969). The applicant then 

multiplied the percentage for each MS– 

DRG (4.1 percent for MS–DRG 466; 58.8 

percent for MS–DRG 467; and 37.1 

percent for MS–DRG 468) by the total 

number of cases in each MS–DRG. 

Based on this calculation, the applicant 

approximated the following number of 

cases representing knee revision 

procedures in each of these three MS– 

DRGs: 1,307 cases in MS–DRG 466; 

18,704 in MS–DRG 467; and 11,794 in 

MS–DRG 468. Similar to our concerns 

about the first analysis, we are 

concerned that the methodology the 

applicant used to determine the 

percentage of cases of knee revision 

procedures still includes cases 

representing hip revision procedures. 

Specifically, in its methodology, the 

applicant did not use any source of 

statistical relevance to isolate cases 

representing knee revision procedures. 

The applicant simply used the 

percentage of Medicare cases for each 

MS–DRG of the overall total cases for 

the three MS–DRGs, which include knee 

and hip revision procedures, and 

multiplied by this percentage to further 

reduce the number of cases. We do not 

believe that this further reduction to the 

total number of Medicare cases has 

isolated cases representing knee 

revision procedures. 

The applicant used the same 

methodology from the first analysis to 

determine the number of eligible cases 

representing TKA procedures assigned 

to MS–DRGs 469 and 470. The applicant 

searched the AHD database and found 

1,217 cases assigned to MS–DRG 469 

and 24,620 cases assigned to MS–DRG 

470. To determine the number of cases 

representing TKA procedures within 

these MS–DRGs, the applicant 

multiplied the total number of cases 

within these MS–DRGs by the 

percentage of 58.5 percent from the NIS 

database, which represents the 

percentage of knee replacement 

procedure cases among the total number 

of cases representing knee, hip and joint 

replacement procedures. This resulted 

in 712 cases in MS–DRG 469 (1,217 * 

.585) and 14,411 cases in MS–DRG 470 

(24,620 * .585). Similar to our concerns 

expressed earlier, we are concerned that 

the methodology the applicant used to 

determine the percentage of cases 

representing TKA procedures still 

includes cases representing hip 

replacement and other joint replacement 

procedures. Specifically, the applicant 

did not uniquely identify cases 

representing TKA procedures and only 

produced a percentage of all cases, 

which still includes cases representing 

hip and other joint replacement 

procedures. 

Based on this analysis, the applicant 

maintained that the total number of 

cases across MS–DRGs 461 and 462 and 

MS–DRGs 466 and 470 was 46,960. The 

applicant determined an average caseweighted charge per case of $80,702. For 

the rest of the analysis, the applicant 

followed the same methodology as the 

first analysis. The applicant removed 

$146 from the average case-weighed 

charge per case for cases assigned to 

MS–DRGs 461 and 462 and $73 from the 

average case-weighted charge per case 

for cases assigned to MS–DRGs 466 

through 470 for charges related to other 

computer-assisted devices/technologies 

used during these procedures and 

additional charges for the use of the 

operating room. 

Similar to the first analysis, the 

applicant used the FY 2012 IPPS impact 

file and the mean value of all relevant 

standardization factors from all 

hospitals to standardize the charges per 

case. Similar to above, we are concerned 

that the analysis provided by the 

applicant did not use hospital-specific 

data and, therefore, the standardization 

process may be inaccurate because of 

the use of mean factors rather than 

hospital-specific factors. By using mean 

factors rather than hospital-specific 

factors, the standardization performed 

by the applicant does not sufficiently 

take into account hospital variations. 

The applicant then inflated the 

charges using an inflation factor of 

10.4227 percent based on the inflation 

factor in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50379), and added the 

charges related to the VKS technology to 

the adjusted average case-weighted 

standardized charge per case. This 

resulted in a final inflated average caseweighted standardized charge per case 

of $90,515. Using the FY 2015 IPPS 

Table 10 thresholds, the applicant 

determined that the average caseVerDate Sep<11>2014 18:20 Apr 29, 2015 Jkt 235001 PO 00000 Frm 00133 Fmt 4701 Sfmt 4702 E:\FR\FM\30APP2.SGM 30APP2

tkelley on DSK3SPTVN1PROD with PROPOSALS2
24456 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

weighted threshold amount for MS– 

DRGs 461 and 462 and MS–DRGs 466 

through 470 is $80,699. Because the 

final inflated average case-weighted 

standardized charge per case exceeded 

the average case-weighted threshold 

amount for the applicable MS–DRGs, 

the applicant maintained that the VKS 

technology meets the cost criterion. 

The applicant’s third analysis used 

data from the FY 2015 CMS Before 

Outliers Removed (BOR) file. The BOR 

file contained 469 cases in MS–DRG 461 

and 9,396 cases in MS–DRG 462. To 

determine the number of cases 

representing bilateral knee revision 

procedures assigned to MS–DRGs 461 

and 462, similar to the first analysis, the 

applicant used an assumption of 4 

percent, which resulted in 19 cases in 

MS–DRG 461 and 376 cases in MS–DRG 

462. Similar to our concerns stated 

earlier, we are concerned that the 

applicant did not uniquely identify 

cases representing bilateral knee 

revision procedures and only produced 

a percentage of all cases, which still 

includes cases representing hip revision 

procedures. 

To determine the number of eligible 

cases reporting knee revision 

procedures assigned to MS–DRGs 466 

through 468, the applicant again 

analyzed the BOR file which contained 

a total of 44,420 cases. Similar to first 

two analyses, because these MS–DRGs 

include cases representing hip and knee 

revision procedures, to determine the 

number of cases representing knee 

revision procedures in each of these 

three MS–DRGs, the applicant first 

divided the number of cases for each 

MS–DRG (4,202 for MS–DRG 466; 

23,390 for MS–DRG 467; and 16,828 for 

MS–DRG 468) by the total number of 

cases in MS–DRGs 466 through 468 

(44,420). The applicant then multiplied 

the percentage for each MS–DRG (9.5 

percent for MS–DRG 466; 52.7 percent 

for MS–DRG 467; and 37.9 percent for 

MS–DRG 468) by the total number of 

cases in each MS–DRG. Based on this 

calculation, the applicant approximated 

the following number of cases 

representing knee revision procedures 

in each of these three MS–DRGs: 3,009 

cases in MS–DRG 466; 16,747 in MS– 

DRG 467; and 12,049 in MS–DRG 468. 

Similar to our concerns stated earlier, 

we are concerned that the methodology 

the applicant used to determine the 

percentage of cases representing knee 

revision procedures still includes cases 

representing hip revision procedures. 

Specifically, in its methodology, the 

applicant did not use any source of 

statistical relevance to isolate cases 

representing knee revision procedures. 

Rather, the applicant used the 

percentage of Medicare cases for each 

MS–DRG of the overall total number of 

cases for the three MS–DRGs, which 

includes cases representing knee and 

hip revision procedures, and multiplied 

by this percentage to further reduce the 

number of cases. We do not believe that 

this further reduction to the total 

number of Medicare cases has isolated 

cases representing knee revision 

procedures. 

The applicant used the same 

methodology from the first analysis to 

determine the number of eligible cases 

reporting TKA procedures assigned to 

MS–DRGs 469 and 470. The BOR file 

contained 27,737 cases in MS–DRG 469 

and 437,649 cases in MS–DRG 470. To 

determine the number of cases 

representing TKA procedures within 

these MS–DRGs, the applicant 

multiplied the total number of cases 

within these MS–DRGs by the 

percentage of 58.5 percent obtained 

from the NIS database, which represents 

the percentage of knee replacement 

cases among the total number of cases 

representing knee, hip, and joint 

replacement procedures. This resulted 

in 16,236 cases in MS–DRG 469 (27,737 

* .585) and 256,178 cases in MS–DRG 

470 (437,649 * .585). Similar to our 

concerns stated earlier, we are 

concerned that the methodology the 

applicant used to determine the 

percentage of cases representing TKA 

procedures still includes cases 

representing hip and other joint 

replacement procedures. Specifically, 

the applicant did not uniquely identify 

cases representing TKA procedures and 

only produced a percentage of all cases, 

which still includes cases representing 

hip and other joint revision procedures. 

Based on this analysis, the applicant 

maintained that the total number of 

cases across MS–DRGs 461 and 462 and 

MS–DRGs 466 through 470 was 304,614. 

The applicant determined an average 

case-weighted charge per case of 

$56,282. For the rest of the analysis, the 

applicant followed the same 

methodology as the first analysis. The 

applicant then removed $146 from the 

average case-weighted charge per case 

for cases assigned to MS–DRGs 461 and 

462 and $73 from the average caseweighted charge per case for cases 

assigned to MS–DRGs 466–470 for 

charges related to other computerassisted devices/technologies used 

during these procedures and additional 

charges for the use of the operating 

room. 

Similar to the first analysis, the 

applicant used the FY 2012 IPPS Impact 

File and the mean value of all relevant 

standardization factors from all 

hospitals to standardize the charges per 

case. Similar to our concerns stated 

earlier, we are concerned that the 

analysis provided by the applicant did 

not use hospital-specific data and, 

therefore, the standardization process 

may be inaccurate because of the use of 

mean factors rather than hospitalspecific factors. By using mean factors 

rather than hospital-specific factors, we 

believe that the standardization 

performed by the applicant does not 

sufficiently take into account hospital 

variations. 

The applicant then inflated the 

charges using an inflation factor of 

10.4227 percent based on the inflation 

factor in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50379), and added the 

charges related to the VKS technology to 

the adjusted average case-weighted 

standardized charge per case. This 

resulted in a final inflated average caseweighted standardized charge per case 

of $66,382. Using the FY 2015 IPPS 

Table 10 thresholds, the applicant 

determined that the average caseweighted threshold amount for MS– 

DRGs 461 and 462 and MS–DRGs 466 

through 470 is $64,280. Because the 

final inflated average case-weighted 

standardized charge per case exceeds 

the average case-weighted threshold 

amount for the applicable MS–DRGs, 

the applicant maintained that the VKS 

technology meets the cost criterion. 

Based on the information provided by 

the applicant, combined with the weight 

of our concerns, we are unable to 

determine if and how the VKS 

technology meets the cost criterion. We 

are inviting public comments on 

whether or not the VKS technology 

meets the cost criterion, specifically 

with regard to the concerns raised. 

With regard to substantial clinical 

improvement, the applicant maintained 

that the VKS technology represents a 

substantial clinical improvement. The 

applicant stated that the device offers a 

treatment option for a patient 

population unresponsive to, or 

ineligible for, currently available 

treatments. The applicant explained that 

the use of the VKS technology has 

improved patient outcomes, including 

rapid recovery of patients diagnosed 

with comorbidities, the early return to 

normal activities, and increased levels 

of activity and functionality. The 

applicant noted that patients treated 

using the VKS technology during TKA 

procedures did not experience 

readmission within 30 days, nor was it 

necessary for the treating physician (the 

surgeon) to complete a problem focused 

medical evaluation during the patient’s 

recovery. The applicant further noted 

that patients having a more favorable 

immediate outcome with a stable TKA 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24457 

48Rodriguez-Merchan EC.: Instability Following 

Total Knee Arthroplasty. HSSJ 2011; 7:273–278. 

49Roche MW, Elson LC, Anderson CR.: A Novel 

Technique Using Sensor-Based Technology to 

Evaluate Tibial Tray Rotation. Orthopedics. 2014 

(In Press). 

50 Gustke KA, et al.: Increased satisfaction after 

total knee replacement using sensor-guided 

technology. Bone Joint J 2014;96–B:1333–8. 

51 Gustke, Golladay, et al.: A New Method for 

Defining Balance: Promising Short-Term Clinical 

Outcomes of Sensor-Guided TKA. The Journal of 

Arthroplasty 25 November 2013 (Article in Press 

DOI: 10.1016/j.arth.2013.10.020) 

52Roche MW, Elson LC, Anderson CR: A Novel 

Technique Using Sensor-Based Technology to 

Evaluate Tibial Tray Rotation. Orthopedics. 2015 

(In Press) 

were shown to return to normal 

function more rapidly than patients 

with unbalanced knees. Therefore, the 

applicant stated that patients with 

complex medical conditions would be 

able to respond to the early return of 

normal daily living. 

The applicant also believed that the 

device offers the ability to diagnose a 

medical condition for a patient 

population experiencing medical 

conditions that are currently 

undetectable, or offers the ability to 

diagnose a medical condition earlier 

than that which is capable using 

currently available technologies. The 

applicant explained that the VKS 

technology provides an improved 

evaluation/diagnosis compared to an 

unbalanced TKA implant. Specifically, 

the applicant stated that the device 

enables the surgeon to obtain 

intraoperative measures enabling the 

surgeon to improve upon the placement 

of the TKA tibial and femoral 

components. Additionally, 

intraoperatively the device leads to an 

immediate diagnosis of an implant that 

can now be accurately positioned due to 

informed fine tissue dissection. The 

applicant stated that the intraoperative 

technique has been demonstrated to 

result in increased implant stability and 

functional congruence. The applicant 

cited the following examples of 

outcomes that have been frequently 

documented and evaluated within 

clinical studies of medical devices: 

• Intended to address the leading 

causes of early implant failure in TKA: 

Instability, malrotation and 

malalignment;48

• Dynamic intercompartmental load 

data and Kinetic Tracking enables 

evidence based soft tissue releases to 

improve stability through full ROM;49

• Provides intraoperative feedback on 

tibial–femoral component rotation, 

position of femoral Contact Points and 

femoral roll-back to facilitate optimal 

component position 

• Enables reproducible, teachable 

surgical technique through quantifying 

surgeon ‘‘feel’’; and 

• Captures intraoperative data for 

inclusion in patient EMR, registries or 

comparative effectiveness studies. 

The applicant stated that use of the 

device significantly improves clinical 

outcomes for a patient population 

experiencing these types of medical 

procedures when compared to currently 

available treatments. The applicant 

explained that extensive research and 

development has resulted in the VKS 

technology demonstrating improved 

patient outcomes in multi-center 

studies. The applicant further explained 

that the VKS technology has 

intraoperatively provided a unique 

opportunity to observe the short-term 

clinical outcomes of patients with a 

quantifiably balanced knee versus those 

who have quantifiably unbalanced 

knees. According to the applicant, in a 

multi-center study, the use of the VKS 

technology has been shown to reduce 

post-operative pain and improve 

activity and patient satisfaction scores 

with statistical significance. 

Additionally, the applicant stated that 

97 percent of patients whose knees were 

balanced using the VKS technology 

reported that they were ‘‘satisfied’’ to 

‘‘very satisfied’’ at 1-year post-operative 

compared to 81 percent patient 

satisfaction after a TKA procedure 

without the use of the VKS technology. 

The applicant stated that the VKS 

technology provided a 16-percent 

improvement in patient satisfaction for 

balanced knees; the first significantly 

notable increase of patient-reported 

satisfaction in over 30 years.50

According to the applicant, the use of 

the VKS technology avoided early 

implant failure. The applicant explained 

that considering the objective to 

ameliorate the present risks of revision 

in TKA procedures, the VKS technology 

has been advanced to address the need 

for improved knee balance through fine 

tissue dissection using information from 

the VKS technology intelligent tibial 

trial. While not disturbing the surgical 

flow of TKA procedures, the applicant 

stated that the VKS technology provides 

the surgeon with data on the dynamic 

intercompartmental load, and kinetic 

tracking enables evidence-based soft 

tissue releases to improve stability 

through full ROM.51 The applicant 

noted that the results of multi-center 

studies, using the VKS technology 

intraoperatively, have provided an 

opportunity to observe the short-term 

clinical outcomes of patients with a 

quantifiably balanced knee versus those 

who have quantifiably unbalanced 

knees. 

The applicant further stated that the 

VKS technology provides intraoperative 

information on tibial–femoral 

component rotation, position of femoral 

contact points and femoral roll-back to 

facilitate optimal component position. 

One clinical study 52 reported 170 

primary TKA procedures where the VKS 

technology corrected what would have 

resulted in unbalanced and malrotated 

implants in 53 percent of the patients. 

The applicant noted that when 

referencing the tibial tubercle to 

maximize tibiofemoral congruency, 53 

percent of patients exhibited 

asymmetrical tibiofemoral congruency 

in extension. The applicant further 

stated that of those patients, 68 percent 

were shown to have excessive internal 

rotation of the tibial tray relative to the 

femur, while 32 percent exhibited 

excessive external rotation. 

Additionally, the average tibiofemoral 

incongruency deviated from a neutral 

position by 6°, ranging from 0.5° to 19.2. 

The applicant stated that when 

comparing the VKS with the convention 

of using the tibial tubercle to maximize 

tibiofemoral congruency to confirm the 

final rotation of the tibial tray, the VKS 

technology provided superior 

information. The applicant added that 

data from using the tibial tubercle to 

maximize tibiofemoral congruency to 

confirm the final rotation of the tibial 

tray are highly variable and inconsistent 

for confirming the final rotation of the 

tibial tray. 

The applicant stated that the VKS 

technology has demonstrated and 

resulted in a ‘‘balanced knee’’ after TKA 

procedures with 6 month and 1 year 

outcome scores showing a significant 

improvement over conventional or 

computer-assisted TKA procedures. 

According to the applicant, by not 

disrupting the surgical flow the VKS 

technology has been viewed by surgeons 

to provide information enabling them to 

improve upon the balance of the knee, 

reduce the degree of rotation and only 

dissect the fine tissue as needed sparing 

the release of the ligaments. The 

applicant further stated that the VKS 

technology has been shown to enable 

reproducible, teachable surgical 

technique through quantifying surgeon 

‘‘feel.’’ 

The applicant provided patient 

outcomes at 6 months and believed that 

this demonstrated a significant 

improvement for the ‘‘balanced knee’’ 

TKA procedures using the VKS 

technology. According to the applicant, 

multivariate binary logistic regression 

analyses were performed for both Knee 

Society Scores (KSS) and Western 

Ontario and McMaster Universities 


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53 Gustke, Golladay, et al.: A New Method for 

Defining Balance: Promising Short-Term Clinical 

Outcomes of Sensor-Guided TKA. The Journal of 

Arthroplasty 25 November 2013 (Article in Press 

DOI: 10.1016/j.arth.2013.10.020). 

Arthritis Index (WOMAC) scores at 6 

months. Variables run in these analyses 

included: age at surgery, BMI, gender, 

preoperative ROM, preoperative 

alignment, change in activity level 

(preoperative to 6 months), and joint 

state (balanced versus unbalanced). For 

KSS and WOMAC, both step-wise and 

backward multivariate logistic 

regression analyses were calculated to 

be best fit models with similar 

significance (P = 0.001). Ultimately, the 

step-wise model was used. The 

applicant stated that the binary model 

revealed that the variable exhibiting the 

most significant effect of improvement 

on KSS and WOMAC scores was 

balanced joint state (P = 0.001; P = 

0.004). The applicant noted that joint 

state was the most highly significant 

variable; this demonstrated similar 

levels of significance throughout all 

possible combinations of variables 

included in the model (P = 0.001). The 

applicant added that joint state was also 

observed to be the sole significant factor 

in patient-reported outcome score 

improvement (P b 0.001). 

The applicant added that analysis of 

the data revealed there was also a 

concurrent significance observed with 

activity level (P = 0.005). However, the 

applicant noted that activity level was 

not significant on its own. The applicant 

concluded that a balanced joint state 

results in a higher activity level,53

which would make activity level more 

of a dependent variable, rather than a 

predictor. Therefore, to demonstrate 

activity level, the applicant used a 

regression analysis and evaluated KSS 

and WOMAC scores at 6 months, with 

odds ratios. According to the applicant, 

odds ratios were calculated based on 

meaningful clinical improvement in 

KSS scores, WOMAC scores, and 

activity levels at 6 months. 

Additionally, based on literature review, 

‘‘meaningful improvement’’ for KSS 

scores were anything greater than 50 

points; WOMAC scores greater than 30 

points; and gains in activity level greater 

than or equal two 2 lifestyle levels (from 

lowest score to highest: sedentary, 

semisedentary, light labor, moderate 

labor, heavy labor). Also, scores from 

the unbalanced group were used as the 

reference point. The applicant stated 

that odds ratio for balanced joint state 

and improved KSS score was 2.5, with 

a positive coefficient (95 percent CI). 

The applicant believed that this 

suggested a high probability of obtaining 

a meaningful improvement in KSS with 

a balanced knee joint, over those who 

do not have a balanced knee. According 

to the applicant, the odds ratio for 

balanced joint state and improved 

WOMAC score was 1.3, with a positive 

coefficient (95 percent CI). The 

applicant believed that this suggested a 

favorable probability that patients with 

a balanced joint state will achieve a 

meaningful improvement in WOMAC 

score, over those that do not have a 

balanced knee. According to the 

applicant, the odds ratio for balanced 

joint state and improved activity level 

was 1.8, with a positive coefficient (95 

percent CI). The applicant believed that 

this also suggested a favorable 

probability of meaningful gains in 

activity level in those with a balanced 

knee, versus those with an unbalanced 

knee. 

The applicant further stated that 1 

year clinical trial evidence supports the 

VKS technology protocol for TKA 

procedures. According to the applicant, 

of the 135 patients undergoing sensorguided surgery, 13 percent remained 

unbalanced (by surgeon discretion). The 

applicant stated that ‘‘surgeon 

discretion,’’ in this analysis, indicates 

that the surgeon recognized and 

accepted the ‘‘unbalanced’’ 

intercompartmental load difference as 

presented by the VKS technology, but 

felt that the knee was in a clinically 

acceptable state. Pre-operatively, there 

was no statistical difference in any 

outcomes measures between the two 

cohorts, the averages of which were: 

total KSS = 105 ± 24.6; total WOMAC 

= 47 ± 14.8. 

Additionally, according to the 

applicant, at 1 year, the average total 

KSS score of balanced patients exceeded 

that of unbalanced patients by 23.3 

points (P <0.001); 179 ± 17.2 and 156 ± 

23.4 for the balanced and unbalanced 

cohort, respectively. The balanced 

cohort average score for KSS pain and 

function, separately, were 96.4 and 82.4 

respectively; the unbalanced cohort 

scored 87.8 and 68.3 points for pain and 

function. The applicant stated that the 

disparities between the balanced and 

unbalanced patients’ pain and function 

scores were also highly statistically 

significant (P <0.001, P=0.022). 

For WOMAC, the applicant noted that 

that the balanced cohort improved their 

score by 8 points; 10 ± 11.8 and 18 ± 17 

for balanced and unbalanced patients, 

respectively (WOMAC is scored with an 

inverse scale; lower scores indicate 

more improvement). The applicant 

further stated that while this difference 

did not prove to be statistically 

significant by the standards set forth for 

this analysis (P = 0.085), the authors 

believed that this is due, in part, to the 

large standard deviations associated 

with both cohorts. 

According to the applicant, the 

balanced cohort’s average activity level 

score was 48.6, which corresponds with 

the light to moderate labor categories 

(tennis, light jogging, heavy yard work) 

and the unbalanced patient’s average 

activity level score was 26.7, which 

corresponds to the upper limits of the 

semi-sedentary range (light housework, 

walking for limited distances). The 

applicant believed that the difference 

between the average scores was 

statistically significant (P = 0.015). The 

applicant noted that the most notable 

aspect of every outcome measure 

collected is that the unbalanced patient 

scores at 1 year still failed to achieve the 

level of improvement of the balanced 

patient scores at 6 months. 

We have a number of concerns 

regarding the applicant’s assertions 

regarding substantial clinical 

improvement. First, we are concerned 

that during the trials, after using the 

device surgeons continued to make 

manual adjustments to the spacers to set 

the knee replacement. The applicant 

maintained that the VKS technology 

presents better accuracy for the surgeon 

when making adjustments to the spacers 

when implanting a knee replacement. 

However, we are concerned that the 

evidence does not delineate the degree 

of any improved outcomes or patient 

satisfaction associated with use of the 

VKS technology versus additional 

manual adjustments made by the 

surgeon. We also are concerned that 

most of the clinical evidence is based on 

patient satisfaction surveys. While the 

survey data appeared to demonstrate 

that patient satisfaction improved, we 

do not believe that the data presented is 

sufficient to determine if the VKS 

technology represents a substantial 

clinical improvement over manual 

adjustment. Furthermore, the use of 

historical literature controls might be 

useful during early clinical 

development, but there are possible 

biases and limitations of this research 

design. Specifically, there could be 

multiple differences in the preprocedure clinical characteristics of 

patients with ‘‘unbalanced’’ knees and 

those with ‘‘balanced’’ knees that could 

affect outcomes, such as more severe 

initial disease, more pre-operative 

misalignment, more obesity, or more 

comorbidity. These and other potential 

confounders were not documented or 

adjusted for in the analyses of outcomes 

in the literature provided by the 

applicant. Additionally, as discussed 

above, the applicant released a first 

version of the VKS technology in 2011 


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and advancements were made to the 

VKS technology that resulted in 

additional FDA clearances in 2013. The 

applicant stated in its application that 

the first version is considered the first 

technology of its kind and, therefore, we 

believe that the VKS technology may no 

longer be considered new. The 

applicant submitted an application for 

the advanced version of the VKS 

technology from 2013. However, the 

applicant did not present clinical data 

to distinguish the improvements made 

to the advanced version from the first 

version. Therefore, we are unable to 

determine if the advanced version 

represents a substantial clinical 

improvement over existing technologies 

(that is, the first version of the VKS 

technology). We are inviting public 

comments on whether the VKS 

technology meets the substantial 

clinical improvement criterion, 

specifically with regard to our concerns. 

i. WATCHMAN® Left Atrial Appendage 

(LAA) Closure Technology 

Boston Scientific Corporation 

submitted an application for new 

technology add-on payments for FY 

2016 for the WATCHMAN® Left Atrial 

Appendage (LAA) Closure Technology 

(WATCHMAN® System). (We note that, 

as discussed in detail later in this 

section, the applicant submitted an 

application for new technology add-on 

payments for FY 2015 for the 

WATCHMAN® System, but withdrew 

its application after we issued the FY 

2015 IPPS/LTCH PPS proposed rule.) 

According to the applicant, when a 

patient has been diagnosed with atrial 

fibrillation (AF), the left atrium does not 

expand and contract normally. As a 

result, the left atrium is not capable of 

completely emptying itself of blood. 

Blood may pool, particularly in the part 

of the left atrium called the left atrial 

appendage. This pooled blood is prone 

to clotting, causing formation of a 

thrombus. If a thrombus breaks off, it is 

called an embolism (or 

thromboembolism). An embolism can 

cause a stroke or other peripheral 

arterial blockage. 

The applicant asserted that the 

WATCHMAN® System device is an 

implant that acts as a physical barrier, 

sealing the LAA to prevent 

thromboemboli from entering into the 

arterial circulation from the LAA, 

thereby reducing the risk of stroke and 

potentially eliminating the need for 

Warfarin therapy for patients diagnosed 

with nonvalvular AF who are eligible 

for Warfarin therapy but for whom the 

risks of long-term oral anticoagulation 

outweigh the benefits. 

With regard to newness criterion, the 

applicant anticipated FDA premarket 

approval of the WATCHMAN® System 

in the first half of 2015. According to 

the applicant, the WATCHMAN®

System is the first LAA closure device 

that would be approved by the FDA. 

Therefore, the applicant believed that 

the technology meets the newness 

criterion. Effective October 1, 2004 (FY 

2005), ICD–9–CM procedure code 37.90 

(Insertion of left atrial appendage 

device) was created to identify and 

describe procedures using the 

WATCHMAN® Left Atrial Appendage 

(LAA) Closure Technology. As stated in 

section II.G.1.a. of the preamble of this 

proposed rule, effective October 1, 2015 

(FY 2016), the ICD–10 coding system 

will be implemented. Under the ICD– 

10–PCS, procedure code 02L73DK 

(Occlusion of left atrial appendage with 

intraluminal device, percutaneous 

approach) is the comparable translation 

for ICD–9–CM procedure code 37.90. 

We are inviting public comments on 

if, and how, the WATCHMAN® System 

meets the newness criterion. 

With regard to the cost criterion, the 

applicant used the FY 2013 MedPAR 

file (which contained inpatient hospital 

claims data for discharges from October 

1, 2012 to September 30, 2013) to search 

for cases reporting ICD–9–CM procedure 

code 37.90. The applicant provided two 

analyses. The first analysis includes all 

claims that reported ICD–9–CM 

procedure code 37.90, regardless of 

whether the code indicated a principal 

procedure that determined the MS–DRG 

assignment of the case. This analysis 

identified 507 cases across 29 MS– 

DRGs. The applicant noted that the 

MedPAR file contained claims that were 

returned to the provider that reported 

charges for actual cases from clinical 

trials that used the WATCHMAN®

System that were well below post-FDA 

approval pricing. Therefore, the 

applicant removed the premarket device 

related charges. The applicant then 

standardized the charges, applied an 

inflation factor of 1.10443 based on the 

2-year charge inflation factor listed in 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50379) and then added post-FDA 

approval charges for the WATCHMAN®

System. Using the anticipated cost of 

the device after FDA approval and the 

National Average Implantable Device 

cost center CCR, the applicant estimated 

device charges post-FDA approval, 

combined those with the inflated 

average case-weighted standardized 

charges per case, and determined a final 

inflated average case-weighted 

standardized charge per case of 

$150,213. The average case-weighted 

threshold amount in the FY 2015 IPPS 

Table 10 for these MS–DRGs was 

$97,505. Because the final inflated 

average case-weighted standardized 

charge per case exceeds the average 

case-weighted threshold amount of 

$97,505, the applicant maintained that 

the WATCHMAN® System meets the 

cost criterion using this analysis. We are 

inviting public comments on the 

whether the WATCHMAN® System 

meets the cost criterion based on this 

analysis. 

In the applicant’s second analysis, 

cases eligible for the WATCHMAN®

System were identified by claims 

reporting ICD–9–CM procedure code 

37.90 assigned to MS–DRGs 250 and 

251 (Percutaneous Cardiovascular 

Procedures without Coronary Artery 

Stent with MCC and without MCC, 

respectively). The applicant believed 

that these are the MS–DRGs to which 

cases are typically assigned if the 

WATCHMAN® System is used in the 

principal procedure performed during 

the inpatient stay. The applicant 

applied the trims in the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR49910 

through 49911), which resulted in 369 

cases. 

As with its first analysis, the 

applicant determined standardized 

nondevice charges for the applicable 

cases using claims data from the FY 

2013 MedPAR file and applied an 

inflation factor. The applicant 

calculated average nondevice charges by 

subtracting what the applicant believed 

was the average total implantable device 

charges (calculated as the sum of the 

five individual device charge fields in 

the MedPAR file that constitute the 

Implantable Device cost center). Similar 

to its first analysis, the applicant then 

standardized the charges, applied an 

inflation factor of 1.10443, subtracted 

the device charges reported on the 

MedPAR claims (reflecting costs during 

the IDE study) and replaced them with 

the anticipated charges following FDA 

approval (converting the costs of the 

device to charges with a CCR of 0.349 

based on the national average 

implantable device CCR from the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

49914)), combined those with the 

inflated average case-weighted 

standardized charges per case, and 

determined a final inflated average caseweighted standardized charge per case 

of $117,663. The average case-weighted 

threshold amount for these MS–DRGs in 

the FY 2015 IPPS Table 10 was $72,804. 

Because the final inflated average caseweighted standardized charge per case 

exceeds the average case-weighted MS– 

DRG threshold amount of $72,804, the 

applicant maintained that the 

WATCHMAN® System meets the cost 


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criterion using this analysis. We note 

that the applicant searched for cases 

reporting ICD–9–CM procedure code 

37.90. In section II.G.3.b. of the 

preamble of this proposed rule, we 

present a proposal regarding cardiac 

ablation and other specified 

cardiovascular procedures. Specifically, 

we are proposing to assign the 

procedures performed within the heart 

chambers using intracardiac techniques, 

including those identified by ICD–9–CM 

procedure code 37.90, to two new 

proposed MS–DRGs: Proposed MS–DRG 

273 (Percutaneous Intracardiac 

Procedures with MCC) and proposed 

MS–DRG 274 (Percutaneous 

Intracardiac Procedures without MCC). 

We believe that this could have 

implications for determining whether 

the applicant meets the cost criterion. 

There have been instances in the past 

where the coding associated with a new 

technology application is included in a 

proposal to change one or more MS– 

DRGs. For example, in the FY 2013 

IPPS/LTCH PPS final rule, we describe 

the cost analysis for the Zenith®

Fenestrated Abdominal Aortic 

Aneurysm Endovascular Graft which 

was identified by ICD–9–CM procedure 

code 39.78. In that same rule, we 

finalized a change to the assignment of 

that procedure code, reassigning it from 

MS–DRGs 252, 253, and 254 to MS– 

DRGs 237 and 238. Because of that 

change, we determined that, for FY 

2013, in order for the Zenith®

Fenestrated Abdominal Aortic 

Aneurysm Endovascular Graft to meet 

the cost criteria, it must demonstrate 

that the average case-weighted 

standardized charge per case exceeds 

the thresholds for MS–DRGs 237 and 

238 (77 FR 55360). We note that in that 

example, MS–DRGs 237 and 238 existed 

previously; therefore, thresholds that 

were 75 percent of one standard 

deviation beyond the geometric mean 

standardized charge for these DRGs 

were available to the public in Table 10 

at the time the application was 

submitted. In this case, if MS–DRGs 273 

and 274 were to be finalized for FY 

2016, we recognize that thresholds that 

are 75 percent of one standard deviation 

beyond the geometric mean 

standardized charge would not have 

been available at the time the 

application was submitted. However, 

we believe that it could be appropriate 

for the applicant to demonstrate that the 

average case-weighted standardized 

charge per case exceeds these thresholds 

for MS–DRGs 273 and 274. Accordingly, 

we intend to calculate supplemental 

threshold values using the data used to 

generate the FY 2015 IPPS/LTCH PPS 

Table 10 and reassign the procedure 

codes in accordance with the proposals 

outlined in section II.G.3.b. of the 

preamble of this proposed rule. We 

intend to make these supplemental 

threshold values available for public 

consideration on our Web site at: http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/

AcuteInpatientPPS/newtech.html. We 

are inviting public comments on 

whether considering these supplemental 

threshold values as part of the cost 

criterion evaluation for this application 

is appropriate and also on how to 

address similar future situations in a 

broader policy context should they 

occur. We also are inviting public 

comments on the whether the 

WATCHMAN® System meets the cost 

criterion based on the applicant’s 

analysis. 

Regarding the substantial clinical 

improvement criterion, we note that the 

applicant applied for new technology 

add-on payments for FY 2015 (as 

discussed in the FY 2015 IPPS/LTCH 

PPS proposed rule (79 FR 28043 

through 28045)). However, prior to the 

publication of the FY 2015 IPPS/LTCH 

PPS final rule, the applicant withdrew 

its application. Before the withdrawal of 

the application, CMS stated its concerns 

with the application in the FY 2015 

IPPS/LTCH PPS proposed rule. The 

applicant included responses to CMS’ 

previous concerns with the FY 2015 

application in its FY 2016 application. 

Therefore, we are addressing the 

applicant’s responses to the previous 

concerns specified in the FY 2015 IPPS/ 

LTCH PPS proposed rule as well as our 

observations on the current FY 2016 

application in this FY 2016 IPPS/LTCH 

PPS proposed rule. 

The applicant asserted that the 

WATCHMAN® System, a system that 

reduces the risk of thromboembolic 

stroke in patients diagnosed with highrisk nonvalvular AF who are eligible for 

Warfarin therapy, but in whom the 

potential risks of Warfarin therapy 

outweigh the potential benefits, meets 

the substantial clinical improvement 

criterion because the WATCHMAN®

System is superior to currently available 

treatments. The applicant claimed that 

the WATCHMAN® System is ideal for 

patients diagnosed with a prior 

hemorrhagic stroke while on Warfarin 

therapy, patients not adherent to 

Warfarin therapy, patients with 

difficulty achieving a therapeutic 

international normalized ratio (INR), 

and patients with an increased risk or 

history of falls. The applicant 

acknowledged that anticoagulation 

using Warfarin therapy or one of the 

novel oral anticoagulation agents 

(NOACs), such as dabigatran, 

rivaroxaban, or apixaban, is effective for 

preventing thromboembolism in 

patients who can tolerate such 

medication over the long term. 

However, these medications are 

associated with certain risks. The 

applicant stated that the most used and 

studied agent, Warfarin, requires dietary 

restrictions, has a high-risk of drug 

interactions, genetic variability in doseresponse, and the need for frequent 

monitoring. According to the applicant, 

the average patient diagnosed with AF 

and treated with Warfarin therapy 

achieves a therapeutic INR for 

approximately one-half of the treatment 

time. The applicant further stated that 

these NOACs also have nonadherence 

risks, high discontinuation rates (up to 

20 percent within 2 years), are difficult 

to monitor effectiveness, and in some 

cases have no readily available reversal 

strategy. 

In support of its assertion that the 

WATCHMAN® System is a substantial 

improvement, the applicant submitted 

data from two pivotal studies 

(PROTECT AF and the WATCHMAN®

Left Atrial Appendage Closure Device in 

Patients With Atrial Fibrillation Versus 

Long-Term Warfarin Therapy 

(PREVAIL)). The data included results 

of a meta-analysis of the PROTECT AF 

and PREVAIL studies, an imputed 

placebo analysis, and a post hoc 

analysis of the bleeding risks associated 

with the WATCHMAN® System. 

According to the applicant, the clinical 

evidence from these trials and analyses 

establish the following: implantation of 

the WATCHMAN® System is safe; the 

WATCHMAN® System is superior to 

Warfarin when evaluated against a 

composite endpoint of all stroke, 

systemic embolism, and cardiovascular 

unexplained death in long-term followup; the WATCHMAN® System provides 

a greater reduction in major bleeding 

events after the conclusion of post 

procedure anti-thrombotic medication; 

and the WATCHMAN® System reduces 

the incidence of ischemic stroke when 

compared to patients diagnosed with AF 

who are not treated with Warfarin or 

other anticoagulation medication. 

We note that, unlike in the FY 2015 

application, the applicant did not 

include data from the ASAP study. In 

the FY 2015 IPPS/LTCH PPS proposed 

rule (79 FR 28043 through 28045), we 

expressed concerns that data from the 

ASAP study suggested that the device 

did not prevent strokes and was 

insufficient to demonstrate efficacy in 

the secondary patient population 

(patients diagnosed with AF who were 

ineligible for oral anticoagulation). We 

specifically stated that the ASAP 


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Registry (5) enrolled 150 patients, at one 

of four centers, that had a 

contraindication to even short-term 

anticoagulation, mostly a history of 

prior bleeding, and there was no control 

group. Device implantation led to a 

serious adverse event in 13 patients (8.7 

percent), including one case of device 

thrombus leading to ischemic stroke. 

Five other patients had a device-related 

thrombus that did not lead to stroke (4 

of these patients were treated with low 

molecular weight heparin), resulting in 

an overall 4.0 percent incidence (6 out 

of 150) of device-associated thrombus. 

In the PROTECT AF trial study, 20 of 

the 473 patients (4.2 percent) had 

device-associated thrombus, 3 of which 

led to an ischemic stroke. The rates of 

device-related thrombus are similar in 

the two studies (4.0 percent versus 4.2 

percent), but the number of patients 

studied is smaller in the ASAP Registry 

(5) study compared to the PROTECT AF 

clinical trial study. In the 14-month 

follow-up data for the ASAP Registry (5) 

study, the rate of stroke or systemic 

embolism was 2.3 percent per year, 

which was said to be ‘‘lower than 

expected’’ based on prior data for 

patients diagnosed with AF who were 

not treated with warfarin (there was no 

concurrent control group). The data 

provided suggested efficacy in this 

patient population. However, we stated 

that we were concerned that there was 

not strong evidence that the device 

prevents stroke. 

In the FY 2016 application, the 

applicant responded that, because the 

current intended use and indications for 

the WATCHMAN® System in the 

United States do not include patients 

who are ineligible for treatment using 

Warfarin therapy, the data from the 

ASAP study are irrelevant to the FY 

2016 application. The applicant 

provided data from an imputed placebo 

analysis, a post-hoc analysis that 

compared the observed rate of ischemic 

strokes in patients treated with the 

WATCHMAN® System compared to no 

therapy, in order to address our concern 

that there was not strong evidence that 

the device prevented stroke. 

According to the applicant, in the 

PROTECT AF trial, 463 patients were 

randomized to the WATCHMAN®

System device and 244 patients to 

Warfarin therapy. Most patients 

randomized to the WATCHMAN®

System device had it implanted (408 = 

88 percent). Over the average 3.8 years 

of follow-up, more patients in the 

Warfarin therapy group withdrew (45 

versus 15) or were lost to follow-up (11 

versus 13) than in the WATCHMAN®

System device group, leading to shorter 

mean follow-up (3.7 versus 3.9 years) in 

the Warfarin therapy group. 

The applicant presented data shown 

in the following table and maintained 

that the results of the PROTECT study 

demonstrate primary efficacy and 

support that the WATCHMAN® System 

is noninferior and superior at 4 years. 

TABLE 3—PROTECT PRIMARY EFFICACY SUPPORTS WATCHMAN® NON-INFERIORITY AND SUPERIORITY AT 4 YEARS

Patient 

years 

Years of mean 

follow-up 

WATCHMAN®

System 

observed rate 

per 100 patient 

years 

Warfarin 

observed rate 

per 100 

patient years 

Percentage 

reduction vs. 

warfarin 

(percent) 

Posterior probability * 

Non-inferiority (NI) 

(percent) 

Superiority (S) 

(percent) 

1065 ....... 1 .5 3 4.9 38 >99 .9 90 .00 NI. 

1588 ....... 2 .3 3 4.3 29 >99 .9 84 .60 NI. 

2621 ....... 3 .8 2 .3 3.8 40 >99 96 NI and S. 

2717 ....... 4 2 .2 3.7 39 >99 .9 95 .40 NI and S. 

* For Bayesian analysis, a posterior probability of 97.5 percent represents non-inferiority; ≥95 percent represents superiority. 

In the FY 2015 IPPS/LTCH PPS 

proposed rule, we expressed concern 

that the evidence presented by the 

applicant demonstrating superiority 

compared to Warfarin therapy was 

insufficient. We expressed concern that 

the PROTECT AF trial was not designed 

to demonstrate superiority, and instead 

was designed to demonstrate 

noninferiority. We also expressed 

concern that the PREVAIL trial endpoint 

was not significantly improved in the 

conventional hypothesis testing 

statistical analysis at any time point. We 

stated that the longer term data showed 

improved efficacy and safety, but still 

remain sparse. In the FY 2016 

application, the applicant stated that, 

under a Bayesian analysis, the 

distributions of the posterior 

probabilities are not symmetrical. 

According to the applicant, posterior 

probabilities represent the appropriate 

way to determine statistical significance 

in Bayesian methodology. As predefined 

in the PROTECT AF trial, a posterior 

probability for noninferiority of equal to 

or more than 97.5 percent, and a 

prespecified level of at least 95 percent 

to support superiority were the criteria 

for statistical testing. According to the 

applicant, in both cases (noninferiority 

and superiority), the criteria were met 

for long-term follow-up as demonstrated 

in the results of the PROTECT AF trial. 

We agree that the Bayesian methodology 

is a valid method of analysis. However, 

we were referencing the overall efficacy 

noninferiority in the PREVAIL trial. 

We continue to be concerned that the 

data results from the PROTECT AF 

study are insufficient to show 

superiority of the WATCHMAN®

System over Warfarin therapy. We note 

that the study was unblinded with a 

noninferiority design. We believe that 

the reduction in cardiovascular 

mortality shown in the results from the 

PROTECT AF study was unexpected 

and not well explained. Among the 57 

patients in the WATCHMAN® System 

group who died, only 53 patient cases 

were assigned a cause of death and only 

5 of the 9 ‘‘unexplained/other deaths’’ 

were included in the primary endpoint, 

although the protocol established that 

unexplained deaths were to be 

considered as cardiovascular 

mortalities. The total number of 

‘‘cardiovascular or unexplained deaths’’ 

would have been 21, not 17. In the 

Warfarin therapy group, there was 1 

‘‘unexplained/other’’ death that should 

have been included in the primary 

endpoint, resulting in a total of 23, not 

22. We acknowledge that it may be 

difficult to calculate the impact of these 

additional events as the intention-totreat analysis of the primary endpoint. 

However, we are concerned that the 

inclusion of the additional deaths could 

have made the posterior probabilities for 

the device less favorable. Based on the 

data at face value, it appears that the 

WATCHMAN® System does not 

demonstrate statistically significant 

superiority over treatment with 

Warfarin therapy until 3.8 years has 

elapsed and the patient has been 

administered 6 months of oral 

anticoagulation and been exposed to the 

risk of the device-related complications. 

We are concerned that the applicant has 


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not demonstrated substantially 

improved clinical outcomes. 

In the prospective randomized 

evaluation of the PREVAIL study, the 

goal was to assess the safety and efficacy 

of LAA occlusion for stroke prevention 

in patients diagnosed with NVAF 

compared to long-term Warfarin 

therapy. The PREVAIL study was a 

confirmatory randomized trial designed 

to further assess the efficacy and safety 

of the WATCHMAN® System device. 

Patient selection and study design were 

similar to the PROTECT AF study. Two 

efficacy and 1 safety coprimary 

endpoints were assessed at 18 months. 

The rate of the first coprimary efficacy 

endpoint overall efficacy (composite of 

stroke, systemic embolism [SE], and 

cardiovascular/unexplained death) was 

0.064 in the WATCHMAN® System 

device group versus 0.063 in the control 

group (rate ratio 1.07 [95 percent 

credible interval (CrI) 0.57 to 1.89]) and 

did not achieve the prespecified criteria 

of noninferiority (upper boundary of 95 

percent CrI 1.75). The rate for the 

second coprimary efficacy endpoint 

(stroke or SE >7 days’ 

postrandomization) was 0.0253 versus 

0.0200 (risk difference 0.0053 [95 

percent CrI –0.0190 to 0.0273]), which 

achieved noninferiority. Early safety 

events were significantly lower than the 

results of the PROTECT AF study, 

which satisfies the prespecified safety 

performance goal. The PREVAIL study 

was designed to demonstrate 

noninferiority with wide efficacy 

margins. However, as previously stated, 

we are concerned that the results of the 

study did not show the overall efficacy 

of the technology to be noninferior. 

The applicant submitted data from a 

patient-level meta-analysis that 

combined the data from the PROTECT 

AF study with the data from the 

PREVAIL study. According to the 

applicant, this analysis supports the 

efficacy of the WATCHMAN® System 

and shows that the device was 

performing as expected compared to the 

Warfarin therapy control arm. The 

datasets were combined and weighted. 

According to the applicant, multiple 

outcomes of interest were examined, 

starting with the primary efficacy 

endpoint and then looking at individual 

outcomes: All stroke (ischemic and 

hemorrhagic) and associated disability; 

systemic embolism; cardiovascular/

unexplained death; and major bleeding. 

The overall incidence of all strokes 

(ischemic and hemorrhagic) was not 

statistically different in the 

WATCHMAN® System arm and the 

Warfarin therapy arm. However, the 

applicant stated that there were 

statistical differences identified when it 

analyzed the stroke subtypes. The 

applicant indicated that, initially, there 

were more ischemic strokes in the 

WATCHMAN® System arm. However, 

after accounting for early procedural 

complications, including strokes (within 

7 days post procedure) in the PROTECT 

AF study, the difference for ischemic 

stroke between the two arms fell below 

statistical significance (p = 0.21). 

According to the applicant, there were 

significantly more hemorrhagic strokes 

and cardiovascular deaths in the 

Warfarin therapy arm compared to the 

WATCHMAN® System arm, showing a 

78 percent and 52 percent reduction in 

those events respectively (p = 0.004 and 

p = 0.006). To better assess the clinical 

impact of the different subtypes of 

strokes on patients, the applicant also 

performed statistical tests on disabilities 

resulting from stroke. The applicant 

indicated that, using a validated stroke 

severity assessment tool (Modified 

Rankin score), analyses show that there 

were significantly less disabling strokes 

with the WATCHMAN® System than 

Warfarin therapy. The applicant 

believed that this represents a 

substantial clinical improvement for the 

WATCHMAN® System device. 

The applicant conducted an imputed 

placebo analysis to assess the benefit 

that untreated patients may expect with 

the WATCHMAN® System device. The 

applicant contended that many patients 

who are eligible for Warfarin therapy are 

not receiving any treatment and, 

therefore, are left unprotected from 

stroke. With annual ischemic stroke 

rates ranging from 5.6 percent to 7.1 

percent, the applicant maintained that 

the WATCHMAN® System device 

provides a substantive clinical benefit. 

In order to assess the benefit that 

untreated patients may be able to expect 

with the WATCHMAN® System, the 

sponsor performed the following 

exploratory analysis. The observed 

device ischemic strokes rates were 

compared against the estimated stroke 

risk of untreated nonvalvular AF 

patients. A placebo arm was then 

constructed using ‘‘well-established, 

validated literature’’ models based on 

both the CHADS2 and CHA2DS2–VASc 

scores. The applicant reported that this 

analysis showed the WATCHMAN®

System device reduced stroke in the 

untreated patient population by 61 to 81 

percent. 

We previously expressed concern that 

there was a lack of strong evidence 

demonstrating that the WATCHMAN®

System prevents stroke at all. The 

applicant responded that the imputed 

placebo analysis cited above addresses 

this concern. The applicant provided 

the table below as part of its FY 2016 

application to show the relative risk 

reduction in Ischemic stroke rates using 

the WATCHMAN® System versus no 

therapy. 

TABLE 5—WATCHMAN® SHOWS SIGNIFICANT REDUCTION IN ISCHEMIC STROKES COMPARED TO NO THERAPY

Study 

Average CHADS 

(2 footnote on 

acronym) score 

WATCHMAN®

patients 

Observed 

WATCHMAN®

annual ischemic 

stroke rate 

(95 percent CI) 

Imputed untreated 

annual event rate 

Relative risk 

reduction 

PROTECT AF .......................................................................... 2.2 1.3 (0.9, 2.0) 5.6–5.7 77% (64%, 84%) 

PREVAIL-only .......................................................................... 2.6 2.3 (1.3, 4.0) 6.6–6.7 65% (39%, 80%)

CAP .......................................................................................... 2.5 1.2 (0.8, 1.8) 6.4 81% (72%, 88%) 

While the results of this analysis 

appear to suggest a large reduction in 

ischemic stroke rates in patients who 

did not receive any treatment, we 

continue to have some concerns 

regarding whether the WATCHMAN®

System device prevents strokes. The 

indication for the treatment of the 

WATCHMAN® System device is for 

patients who are eligible for Warfarin 

therapy as opposed to patients who are 

ineligible for Warfarin therapy. We are 

concerned that the results of the 

imputed placebo analysis are not 

sufficient to determine whether the 

WATCHMAN® System reduces the risk 

of stroke in patients who are eligible for 

Warfarin therapy. The applicant 

suggested that patients who are 

subtherapeutic or noncompliant with 

Warfarin therapy would have the same 

risk of stroke as patients who do not 

receive any therapy. However, the 

applicant but did not offer any evidence 


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that these two groups have the same risk 

of stroke. The WATCHMAN® System 

device is intended only for use in 

patients who are eligible for the 

anticoagulation, not for patients who 

have contraindications to oral 

anticoagulation. Because the device will 

not be labeled for use in those patients, 

we believe that an analysis comparing 

stroke risk of untreated patients to those 

patients treated with the WATCHMAN®

System is of limited value in assessing 

the technology’s benefit over existing 

therapy. 

The applicant asserted that one of the 

primary goals of mechanical LAA 

closure is to provide an alternative 

treatment for patients other than longterm Warfarin therapy and exposure to 

the associated risk for bleeding. 

Although the primary efficacy endpoint 

of the PROTECT AF and PREVAIL 

studies considered hemorrhagic stroke, 

it did not encompass other types of 

major bleeding that may be associated 

with the use of Warfarin. The applicant 

indicated that it performed a 

supplemental analysis to determine the 

relative risks of all types of bleeding. 

The applicant divided the follow-up 

interval into four subsections (7 days, 45 

days, 6 months, and 54 months). The 

applicant compared bleeding events in 

the WATCHMAN® System group with 

the Warfarin therapy group and 

concluded that, after 6 months (and 

discontinued use of Clopidogrel in the 

WATCHMAN® System group), the 

continued use of Warfarin was 

associated with a 3.4 fold increase in the 

risk of major bleeding. According to the 

applicant, the significant reduction in 

bleeding after the procedural and 

concomitant medication therapy (6 

months) with the cessation of long-term 

anticoagulants illustrates the substantial 

clinical benefit of the WATCHMAN®

System. However, given the high burden 

endured (most notably, the higher risk 

of bleeding occurring in the first 7 days 

of an inpatient hospital stay) to achieve 

a reduction in bleeding in the long term, 

we do not believe that the 

WATCHMAN® System meets the 

criteria for substantially improved 

clinical outcomes. We are inviting 

public comments on whether this 

technology meets the substantial 

clinical improvement criterion, 

particularly in light of the applicant’s 

response to our previous concerns and 

our current concern that there remains 

insufficient evidence that the 

WATCHMAN® System substantially 

improves clinical outcomes in patients 

diagnosed with nonvalvular AF and 

who are eligible for Warfarin therapy. 

We did not receive any public 

comments in response to the New 

Technology Town Hall meeting held on 

February 13, 2015 in regard to the 

WATCHMAN® System technology. 

III. Proposed Changes to the Hospital 

Wage Index for Acute Care Hospitals 

A. Background 

1. Legislative Authority 

Section 1886(d)(3)(E) of the Act 

requires that, as part of the methodology 

for determining prospective payments to 

hospitals, the Secretary adjust the 

standardized amounts for area 

differences in hospital wage levels by a 

factor (established by the Secretary) 

reflecting the relative hospital wage 

level in the geographic area of the 

hospital compared to the national 

average hospital wage level. We 

currently define hospital labor market 

areas based on the delineations of 

statistical areas established by the Office 

of Management and Budget (OMB). A 

discussion of the proposed FY 2016 

hospital wage index based on the 

statistical areas appears under sections 

III.A.2. and G. of the preamble of this 

proposed rule. 

Section 1886(d)(3)(E) of the Act 

requires the Secretary to update the 

wage index annually and to base the 

update on a survey of wages and wagerelated costs of short-term, acute care 

hospitals. This provision also requires 

that any updates or adjustments to the 

wage index be made in a manner that 

ensures that aggregate payments to 

hospitals are not affected by the change 

in the wage index. The proposed 

adjustment for FY 2016 is discussed in 

section II.B. of the Addendum to this 

proposed rule. 

As discussed in section III.J. of the 

preamble of this proposed rule, we also 

take into account the geographic 

reclassification of hospitals in 

accordance with sections 1886(d)(8)(B) 

and 1886(d)(10) of the Act when 

calculating IPPS payment amounts. 

Under section 1886(d)(8)(D) of the Act, 

the Secretary is required to adjust the 

standardized amounts so as to ensure 

that aggregate payments under the IPPS 

after implementation of the provisions 

of sections 1886(d)(8)(B), 1886(d)(8)(C), 

and 1886(d)(10) of the Act are equal to 

the aggregate prospective payments that 

would have been made absent these 

provisions. The proposed budget 

neutrality adjustment for FY 2016 is 

discussed in section II.A.4.b. of the 

Addendum to this proposed rule. 

Section 1886(d)(3)(E) of the Act also 

provides for the collection of data every 

3 years on the occupational mix of 

employees for short-term, acute care 

hospitals participating in the Medicare 

program, in order to construct an 

occupational mix adjustment to the 

wage index. A discussion of the 

occupational mix adjustment that we 

are proposing to apply, beginning 

October 1, 2015 (to the FY 2016 wage 

index), appears under sections III.E.3. 

and F. of the preamble of this proposed 

rule. 

2. Core-Based Statistical Areas (CBSAs) 

for the Proposed Rule 

The wage index is calculated and 

assigned to hospitals on the basis of the 

labor market area in which the hospital 

is located. Under section 1886(d)(3)(E) 

of the Act, beginning with FY 2005, we 

delineate hospital labor market areas 

based on OMB-established Core-Based 

Statistical Areas (CBSAs). The current 

statistical areas (which were 

implemented beginning with FY 2015) 

are based on revised OMB delineations 

issued on February 28, 2013, in OMB 

Bulletin No. 13–01. OMB Bulletin No. 

13–01 established revised delineations 

for Metropolitan Statistical Areas, 

Micropolitan Statistical Areas, and 

Combined Statistical Areas in the 

United States and Puerto Rico, and 

provided guidance on the use of the 

delineations of these statistical areas 

based on new standards published on 

June 28, 2010 in the Federal Register 

(75 FR 37246 through 37252) and the 

2010 Census of Population and Housing 

data (we refer to these revised OMB 

delineations as the ‘‘new OMB 

delineations’’ in this proposed rule). A 

copy of this bulletin may be obtained at 

http://www.whitehouse.gov/sites/

default/files/omb/bulletins/2013/b-13- 

01.pdf. We refer readers to the FY 2015 

IPPS/LTCH PPS final rule (79 FR 49951 

through 49963) for a full discussion of 

our implementation of the new OMB 

labor market area delineations for the 

FY 2015 wage index. For FY 2016, we 

are continuing to use the new OMB 

delineations that we adopted beginning 

with FY 2015 to calculate the area wage 

indexes and the transition periods, 

which we discuss below. 

B. Worksheet S–3 Wage Data for the 

Proposed FY 2016 Wage Index 

The proposed FY 2016 wage index 

values are based on the data collected 

from the Medicare cost reports 

submitted by hospitals for cost reporting 

periods beginning in FY 2012 (the FY 

2015 wage indexes were based on data 

from cost reporting periods beginning 

during FY 2011). 

1. Included Categories of Costs 

The proposed FY 2016 wage index 

includes the following categories of data 

associated with costs paid under the 

IPPS (as well as outpatient costs): 


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• Salaries and hours from short-term, 

acute care hospitals (including paid 

lunch hours and hours associated with 

military leave and jury duty); 

• Home office costs and hours; 

• Certain contract labor costs and 

hours (which includes direct patient 

care, certain top management, 

pharmacy, laboratory, and nonteaching 

physician Part A services, and certain 

contract indirect patient care services 

(as discussed in the FY 2008 final rule 

with comment period (72 FR 47315 

through 47318)); and 

• Wage-related costs, including 

pension costs (based on policies 

adopted in the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51586 through 51590)) 

and other deferred compensation costs. 

2. Excluded Categories of Costs 

Consistent with the wage index 

methodology for FY 2015, the proposed 

wage index for FY 2016 also excludes 

the direct and overhead salaries and 

hours for services not subject to IPPS 

payment, such as skilled nursing facility 

(SNF) services, home health services, 

costs related to GME (teaching 

physicians and residents) and certified 

registered nurse anesthetists (CRNAs), 

and other subprovider components that 

are not paid under the IPPS. The 

proposed FY 2016 wage index also 

excludes the salaries, hours, and wagerelated costs of hospital-based rural 

health clinics (RHCs), and Federally 

qualified health centers (FQHCs) 

because Medicare pays for these costs 

outside of the IPPS (68 FR 45395). In 

addition, salaries, hours, and wagerelated costs of CAHs are excluded from 

the proposed wage index for the reasons 

explained in the FY 2004 IPPS final rule 

(68 FR 45397 through 45398). 

3. Use of Wage Index Data by Suppliers 

and Providers Other Than Acute Care 

Hospitals Under the IPPS 

Data collected for the IPPS wage 

index also are currently used to 

calculate wage indexes applicable to 

suppliers and other providers, such as 

SNFs, home health agencies (HHAs), 

ambulatory surgical centers (ASCs), and 

hospices. In addition, they are used for 

prospective payments to IRFs, IPFs, and 

LTCHs, and for hospital outpatient 

services. We note that, in the IPPS rules, 

we do not address comments pertaining 

to the wage indexes of any supplier or 

provider except IPPS providers and 

LTCHs. Such comments should be made 

in response to separate proposed rules 

for those suppliers and providers. 

C. Verification of Worksheet S–3 Wage 

Data 

The wage data for the proposed FY 

2016 wage index were obtained from 

Worksheet S–3, Parts II and III of the 

Medicare cost report for cost reporting 

periods beginning on or after October 1, 

2011, and before October 1, 2012. For 

wage index purposes, we refer to cost 

reports during this period as the ‘‘FY 

2012 cost report,’’ the ‘‘FY 2012 wage 

data,’’ or the ‘‘FY 2012 data.’’ 

Instructions for completing the wage 

index sections of Worksheet S–3 are 

included in the Provider 

Reimbursement Manual (PRM), Part 2 

(Pub. No. 15–2), Chapter 40, Sections 

4005.2 through 4005.4 for Form CMS– 

2552–10. The data file used to construct 

the proposed FY 2016 wage index 

includes FY 2012 data submitted to us 

as of February 25, 2015. As in past 

years, we performed an extensive 

review of the wage data, mostly through 

the use of edits designed to identify 

aberrant data. 

We asked our MACs to revise or verify 

data elements that result in specific edit 

failures. For the proposed FY 2016 wage 

index, we identified and excluded 93 

providers with aberrant data that should 

not be included in the proposed wage 

index. If data elements for some of these 

providers with aberrant data are 

corrected, we intend to include data 

from those providers in the final FY 

2016 wage index. We also adjusted 

certain aberrant data elements within a 

provider’s data and included these data 

in the proposed wage index. For 

example, in situations where a hospital 

did not have documentable salaries, 

wages, and hours for contract 

housekeeping and dietary services, we 

imputed estimates, in accordance with 

established policies as discussed in the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 49965 through 49967). We instructed 

MACs to complete their data 

verification of questionable data 

elements and to transmit any changes to 

the wage data no later than February 25, 

2015. We intend to resolve all 

unresolved data elements by the date 

the FY 2016 IPPS/LTCH PPS final rule 

is issued. The revised data will be 

reflected in the FY 2016 IPPS/LTCH 

PPS final rule. 

In constructing the proposed FY 2016 

wage index, we included the wage data 

for facilities that were IPPS hospitals in 

FY 2012, inclusive of those facilities 

that have since terminated their 

participation in the program as 

hospitals, as long as those data did not 

fail any of our edits for reasonableness. 

We believe that including the wage data 

for these hospitals is, in general, 

appropriate to reflect the economic 

conditions in the various labor market 

areas during the relevant past period 

and to ensure that the current wage 

index represents the labor market area’s 

current wages as compared to the 

national average of wages. However, we 

excluded the wage data for CAHs as 

discussed in the FY 2004 IPPS final rule 

(68 FR 45397 through 45398). For this 

FY 2016 IPPS/LTCH PPS proposed rule, 

we removed 12 hospitals that converted 

to CAH status on or after February 13, 

2014, the cut-off date for CAH exclusion 

from the FY 2015 wage index, and 

through and including February 5, 2015, 

the cut-off date for CAH exclusion from 

the FY 2016 wage index. After removing 

hospitals with aberrant data and 

hospitals that converted to CAH status, 

we calculated the proposed FY 2016 

wage index based on 3,335 hospitals. 

For the proposed FY 2016 wage 

index, we allotted the wages and hours 

data for a multicampus hospital among 

the different labor market areas where 

its campuses are located in the same 

manner that we allotted such hospitals’ 

data in the FY 2015 wage index (79 FR 

49964). Table 2, which contains the 

proposed FY 2016 wage index 

associated with this proposed rule 

(available via the Internet on the CMS 

Web site), includes separate wage data 

for the campuses of 7 multicampus 

hospitals. 

D. Method for Computing the Proposed 

FY 2016 Unadjusted Wage Index 

The method used to compute the 

proposed FY 2016 wage index without 

an occupational mix adjustment follows 

the same methodology that we used to 

compute the FY 2012, FY 2013, FY 

2014, and FY 2015 final wage indexes 

without an occupational mix adjustment 

(76 FR 51591 through 51593, 77 FR 

53366 through 53367, 78 FR 50587 

through 50588, and 79 FR 49967, 

respectively). 

As discussed in the FY 2012 IPPS/

LTCH PPS final rule, in ‘‘Step 5,’’ for 

each hospital, we adjust the total 

salaries plus wage-related costs to a 

common period to determine total 

adjusted salaries plus wage-related 

costs. To make the wage adjustment, we 

estimate the percentage change in the 

employment cost index (ECI) for 

compensation for each 30-day 

increment from October 14, 2011, 

through April 15, 2013, for private 

industry hospital workers from the BLS’ 

Compensation and Working Conditions. 

We have consistently used the ECI as 

the data source for our wages and 

salaries and other price proxies in the 

IPPS market basket, and we are not 

proposing any changes to the usage for 


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FY 2016. The factors used to adjust the 

hospital’s data were based on the 

midpoint of the cost reporting period, as 

indicated in the following table. 

MIDPOINT OF COST REPORTING

PERIOD

After Before Adjustment 

factor 

10/14/2011 11/15/2011 1.02167 

11/14/2011 12/15/2011 1.02029 

12/14/2011 01/15/2012 1.01893 

01/14/2012 02/15/2012 1.01756 

02/14/2012 03/15/2012 1.01620 

03/14/2012 04/15/2012 1.01484 

04/14/2012 05/15/2012 1.01348 

05/14/2012 06/15/2012 1.01213 

06/14/2012 07/15/2012 1.01080 

07/14/2012 08/15/2012 1.00951 

08/14/2012 09/15/2012 1.00825 

09/14/2012 10/15/2012 1.00699 

10/14/2012 11/15/2012 1.00568 

11/14/2012 12/15/2012 1.00433 

12/14/2012 01/15/2013 1.00292 

01/14/2013 02/15/2013 1.00148 

02/14/2013 03/15/2013 1.00000 

03/14/2013 04/15/2013 0.98259 

For example, the midpoint of a cost 

reporting period beginning January 1, 

2012, and ending December 31, 2012, is 

June 30, 2012. An adjustment factor of 

1.01080 would be applied to the wages 

of a hospital with such a cost reporting 

period. 

Using the data as described above, the 

proposed FY 2016 national average 

hourly wage (unadjusted for 

occupational mix) is $40.1203. The 

proposed FY 2016 Puerto Rico overall 

average hourly wage (unadjusted for 

occupational mix) is $16.718. 

E. Proposed Occupational Mix 

Adjustment to the FY 2016 Wage Index 

As stated earlier, section 1886(d)(3)(E) 

of the Act provides for the collection of 

data every 3 years on the occupational 

mix of employees for each short-term, 

acute care hospital participating in the 

Medicare program, in order to construct 

an occupational mix adjustment to the 

wage index, for application beginning 

October 1, 2004 (the FY 2005 wage 

index). The purpose of the occupational 

mix adjustment is to control for the 

effect of hospitals’ employment choices 

on the wage index. For example, 

hospitals may choose to employ 

different combinations of registered 

nurses, licensed practical nurses, 

nursing aides, and medical assistants for 

the purpose of providing nursing care to 

their patients. The varying labor costs 

associated with these choices reflect 

hospital management decisions rather 

than geographic differences in the costs 

of labor. 

1. Development of Data for the Proposed 

FY 2016 Occupational Mix Adjustment 

Based on the 2013 Medicare Wage Index 

Occupational Mix Survey 

As provided for under section 

1886(d)(3)(E) of the Act, we collect data 

every 3 years on the occupational mix 

of employees for each short-term, acute 

care hospital participating in the 

Medicare program. 

As discussed in the FY 2015 IPPS/

LTCH PPS final rule (79 FR 49967 

through 49968), the occupational mix 

adjustment to the FY 2015 wage index 

was based on data collected on the 2010 

Occupational Mix Survey Hospital 

Reporting Form (CMS–10079 (2010)). 

For the proposed FY 2016 wage index, 

we are proposing to use the 

occupational mix data collected on the 

new 2013 survey to compute the 

occupational mix adjustment for FY 

2016, as discussed in section II.B.2. of 

the preamble of this proposed rule. 

2. New 2013 Occupational Mix Survey 

for the Proposed FY 2016 Wage Index 

Section 304(c) of Public Law 106–554 

amended section 1886(d)(3)(E) of the 

Act to require CMS to collect data every 

3 years on the occupational mix of 

employees for each short-term, acute 

care hospital participating in the 

Medicare program. We collected data in 

2010 to compute the occupational mix 

adjustment for the FY 2013, FY 2014, 

and FY 2015 wage index. Therefore, we 

were required to collect data in 2013 

and are using these data to compute the 

occupational mix adjustment for the FY 

2016 wage index. 

On December 7, 2012, we published 

in the Federal Register a notice 

soliciting comments on the proposed 

2013 Medicare Wage Index 

Occupational Mix Survey (77 FR 73032 

through 73033). The new 2013 survey, 

which is being applied to the proposed 

FY 2016 wage index, includes the same 

data elements and definitions as the 

2010 survey and provides for the 

collection of hospital-specific wages and 

hours data for nursing employees for 

calendar year 2013 (that is, payroll 

periods ending between January 1, 2013 

and December 31, 2013). The comment 

period for the notice ended on February 

5, 2013. After considering the public 

comments that we received on the 

December 2012 notice, we made a few 

minor editorial changes and published 

the 2013 survey in the Federal Register 

on February 28, 2013 (78 FR 13679 

through 13680). This survey was 

approved by OMB on May 14, 2013, and 

is available on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/Downloads/WAGEINDEX-OCCUPATIONAL-MIXSURVEY2013.pdf. 

The 2013 Occupational Mix Survey 

Hospital Reporting Form CMS–10079 

for the Wage Index Beginning FY 2016 

(in Excel format) is available on the 

CMS Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/Medicare-WageIndex-Occupational-MixSurvey2013.html?DLPage=

1&DLSort=1&DLSortDir=descending. 

Hospitals were required to submit their 

completed 2013 surveys to their MACs 

by July 1, 2014. The preliminary, 

unaudited 2013 survey data were posted 

on the CMS Web site afterward, on July 

11, 2014. 

As with the Worksheet S–3 cost report 

wage data, we asked our MACs to revise 

or verify data elements in hospitals’ 

occupational mix surveys that resulted 

in certain edit failures. Certain surveys 

with aberrant data elements are 

excluded from the proposed FY 2016 

wage index, but any data elements 

resolved and revised in time to be 

included in the final wage index will be 

reflected in the FY 2016 IPPS/LTCH 

PPS final rule. 

3. Calculation of the Proposed 

Occupational Mix Adjustment for FY 

2016 

For FY 2016, we are proposing to 

calculate the occupational mix 

adjustment factor using the same 

methodology that we used for the FY 

2012, FY 2013, FY 2014, and FY 2015 

wage indexes (76 FR 51582 through 

51586, 77 FR 53367 through 53368, 78 

FR 50588 through 50589, and 79 FR 

49968, respectively). As a result of 

applying this methodology, the 

proposed FY 2016 occupational mix 

adjusted national average hourly wage is 

$40.0853. The proposed FY 2016 

occupational mix adjusted Puerto Ricospecific average hourly wage is 

$16.6329. 

Because the occupational mix 

adjustment is required by statute, all 

hospitals that are subject to payments 

under the IPPS, or any hospital that 

would be subject to the IPPS if not 

granted a waiver, must complete the 

occupational mix survey, unless the 

hospital has no associated cost report 

wage data that are included in the FY 

2016 wage index. For the proposed FY 

2016 wage index, because we are using 

the Worksheet S–3, Parts II and III wage 

data of 3,335 hospitals, and we are using 

the occupational mix surveys of 3,039 

hospitals for which we also have 

Worksheet S–3 wage data, that 

represents a ‘‘response’’ rate of 91.1 


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percent (3,039/3,335). In the proposed 

FY 2016 wage index in this proposed 

rule, we applied proxy data for 

noncompliant hospitals, new hospitals, 

or hospitals that submitted erroneous or 

aberrant data in the same manner that 

we applied proxy data for such 

hospitals in the FY 2012 wage index 

occupational mix adjustment (76 FR 

51586). 

In the FY 2011 IPPS/LTCH PPS 

proposed rule and final rule (75 FR 

23943 and 75 FR 50167, respectively), 

we stated that, in order to gain a better 

understanding of why some hospitals 

are not submitting the occupational mix 

data, we will require hospitals that do 

not submit occupational mix data to 

provide an explanation for not 

complying. This requirement was 

effective for the 2013 occupational mix 

survey as well as the 2010 occupational 

mix survey. We instructed MACs to 

continue gathering this information as 

part of the FY 2016 wage index desk 

review process. We stated that we 

would review these data for future 

analysis and consideration of potential 

penalties for noncompliant hospitals. 

F. Analysis and Implementation of the 

Proposed Occupational Mix Adjustment 

and the Proposed FY 2016 Occupational 

Mix Adjusted Wage Index 

As discussed in section III.E. of the 

preamble of this proposed rule, for FY 

2016, we apply the occupational mix 

adjustment to 100 percent of the 

proposed FY 2016 wage index. We 

calculated the proposed occupational 

mix adjustment using data from the 

2013 occupational mix survey data, 

using the methodology described in the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51582 through 51586). 

Using the occupational mix survey 

data and applying the occupational mix 

adjustment to 100 percent of the 

proposed FY 2016 wage index results in 

a proposed national average hourly 

wage of $40.0853 and a proposed 

Puerto-Rico specific average hourly 

wage of $16.6329. After excluding data 

of hospitals that either submitted 

aberrant data that failed critical edits or 

that did not have FY 2012 Worksheet S– 

3, Parts II and III, cost report data for use 

in calculating the proposed FY 2016 

wage index, we calculated the proposed 

FY 2016 wage index using the 

occupational mix survey data from 

3,039 hospitals. For the proposed FY 

2016 wage index, because we are using 

the Worksheet S–3, Parts II and III wage 

data of 3,335 hospitals, and we are using 

the occupational mix survey data of 

3,039 hospitals for which we also have 

Worksheet S–3 wage data, those data 

represent a ‘‘response’’ rate of 91.1 

percent (3,039/3,335). The proposed FY 

2016 national average hourly wages for 

each occupational mix nursing 

subcategory as calculated in Step 2 of 

the occupational mix calculation are as 

follows: 

Occupational mix nursing 

subcategory 

Proposed 

average 

hourly wage 

National RN .......................... 38 .70789914 

National LPN and Surgical 

Technician ......................... 22 .793680926 

National Nurse Aide, Orderly, 

and Attendant .................... 15 .944111418 

National Medical Assistant ... 18 .009577806 

National Nurse Category ...... 32 .783151666 

The proposed national average hourly 

wage for the entire nurse category as 

computed in Step 5 of the occupational 

mix calculation is $32.783151666. 

Hospitals with a nurse category average 

hourly wage (as calculated in Step 4 of 

the occupational mix calculation) of 

greater than the national nurse category 

average hourly wage receive an 

occupational mix adjustment factor (as 

calculated in Step 6 of the occupational 

mix calculation) of less than 1.0. 

Hospitals with a nurse category average 

hourly wage (as calculated in Step 4 of 

the occupational mix calculation) of less 

than the national nurse category average 

hourly wage receive an occupational 

mix adjustment factor (as calculated in 

Step 6 of the occupational mix 

calculation) of greater than 1.0. 

Based on the 2013 occupational mix 

survey data, we determined (in Step 7 

of the occupational mix calculation) that 

the national percentage of hospital 

employees in the nurse category is 42.54 

percent, and the national percentage of 

hospital employees in the all other 

occupations category is 57.46 percent. 

At the CBSA level, the percentage of 

hospital employees in the nurse 

category ranged from a low of 26.72 

percent in one CBSA to a high of 80.55 

percent in another CBSA. 

The proposed FY 2016 Puerto Ricospecific average hourly wages for each 

occupational mix nursing subcategory 

as calculated in Step 2 of the 

occupational mix calculation are as 

follows: 

Occupational mix nursing 

subcategory 

Proposed 

Puerto Rico 

average 

hourly wage 

Puerto Rico RN .................... 16 .762672135 

Puerto Rico LPN and Surgical Technician ................ 10 .053073049 

Puerto Rico Nurse Aide, Orderly, and Attendant .......... 9 .695410146 

Puerto Rico Medical Assistant ..................................... 21 .962356196 

Occupational mix nursing 

subcategory 

Proposed 

Puerto Rico 

average 

hourly wage 

Puerto Rico Nurse Category 14 .563182257 

Based on the 2013 occupational mix 

survey data, we determined (in Step 7 

of the occupational mix calculation) that 

the Puerto Rico percentage of hospital 

employees in the nurse category is 49.93 

percent, and the Puerto Rico percentage 

of hospital employees in the all other 

occupations category is 50.07 percent. 

We also compared the proposed FY 

2016 wage data adjusted for 

occupational mix from the 2013 survey 

to the proposed FY 2016 wage data 

adjusted for occupational mix from the 

2010 survey. This analysis illustrates 

the effect on area wage indexes of using 

the 2013 survey data compared to the 

2010 survey data; that is, it shows 

whether hospitals’ wage indexes would 

increase or decrease under the 2013 

survey data as compared to the prior 

2010 survey data. Of the 407 urban 

CBSAs and 47 rural CBSAs, our analysis 

shows that the proposed FY 2016 wage 

index values for 183 (45.0 percent) 

urban areas and 20 (42.6 percent) rural 

areas would increase. Fifty-three (13.0 

percent) urban areas would increase by 

greater than or equal to 1 percent but 

less than 5 percent, and 5 (1.2 percent) 

urban areas would increase by 5 percent 

or more. Four (8.5 percent) rural areas 

would increase by greater than or equal 

to 1 percent but less than 5 percent, and 

no rural areas would increase by 5 

percent or more. However, the proposed 

wage index values for 220 (54.1 percent) 

urban areas and 27 (57.4 percent) rural 

areas would decrease using the 2013 

survey data. Seventy-two (17.7 percent) 

urban areas would decrease by greater 

than or equal to 1 percent but less than 

5 percent, and one (0.2 percent) urban 

area would decrease by 5 percent or 

more. Seven (14.9 percent) rural areas 

would decrease by greater than or equal 

to 1 percent but less than 5 percent, and 

no rural areas would decrease by 5 

percent or more. The largest positive 

impacts using the 2013 survey data 

compared to the 2010 survey data are 

15.0 percent for an urban area and 3.8 

percent for a rural area. The largest 

negative impacts are 5.0 percent for an 

urban area and 1.9 percent for two rural 

areas. Four urban areas and no rural 

areas would be unaffected. These results 

indicate that the proposed wage indexes 

of more CBSAs overall (54.4 percent) 

would decrease due to application of 

the 2013 occupational mix survey data 

as compared to the 2010 occupational 

mix survey data to the wage index. 


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Further, a larger percentage of urban 

areas (45.0 percent) would benefit from 

the use of the 2013 occupational mix 

survey data as compared to the 2010 

occupational mix survey data than 

would rural areas (42.6 percent). 

We compared the proposed FY 2016 

occupational mix adjusted wage indexes 

for each CBSA to the proposed 

unadjusted wage indexes for each 

CBSA. As a result of applying the 

occupational mix adjustment to the 

wage data, the proposed wage index 

values for 222 (54.5 percent) urban areas 

and 24 (51.1 percent) rural areas would 

increase. One hundred one (24.8 

percent) urban areas would increase by 

greater than or equal to 1 percent but 

less than 5 percent, and 6 (1.5 percent) 

urban areas would increase by 5 percent 

or more. Nine (19.1 percent) rural areas 

would increase by greater than or equal 

to 1 percent but less than 5 percent, and 

no rural areas would increase by 5 

percent or more. However, the proposed 

wage index values for 185 (45.5 percent) 

urban areas and 23 (48.9 percent) rural 

areas would decrease. Ninety-three (22.9 

percent) urban areas would decrease by 

greater than or equal to 1 percent but 

less than 5 percent, and no urban areas 

would decrease by 5 percent or more. 

Eight (17.0 percent) rural areas would 

decrease by greater than or equal to 1 

percent but less than 5 percent, and no 

rural areas would decrease by 5 percent 

or more. The largest positive impacts 

would be 17.4 percent for an urban area 

and 2.7 percent for two rural areas. The 

largest negative impacts would be 4.7 

percent for an urban area and 2.1 

percent for a rural area. No urban or 

rural areas would remain unchanged by 

application of the proposed 

occupational mix adjustment. These 

results indicate that a larger percentage 

of urban areas (54.5 percent) would 

benefit from application of the proposed 

occupational mix adjustment than 

would rural areas (51.1 percent). 

G. Transitional Wage Indexes 

1. Background 

In the FY 2015 IPPS/LTCH PPS 

proposed rule and final rule (79 FR 

28060 and 49957, respectively), we 

stated that, overall, we believed 

implementing the new OMB labor 

market area delineations would result in 

wage index values being more 

representative of the actual costs of 

labor in a given area. However, we 

recognized that some hospitals would 

experience decreases in wage index 

values as a result of the implementation 

of these new OMB labor market area 

delineations. We also realized that some 

hospitals would have higher wage index 

values due to the implementation of the 

new OMB labor market area 

delineations. 

The FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49957) explained the 

methodology utilized in implementing 

prior transition periods when adopting 

changes that have significant payment 

implications, particularly large negative 

impacts. Specifically, for FY 2005, in 

the FY 2005 IPPS final rule (69 FR 

49032 through 49034), we provided 

transitional wage indexes when the 

OMB definitions were implemented 

after the 2000 Census. The FY 2015 

IPPS/LTCH PPS final rule (79 FR 49957 

through 49962) established similar 

transition methodologies to mitigate any 

negative payment impacts experienced 

by hospitals due to our adoption of the 

new OMB labor market area 

delineations for FY 2015. 

As finalized in the FY 2015 IPPS/

LTCH PPS final rule (79 FR 49957 

through 49960) and as discussed below, 

for FY 2016, we are in the second year 

of two 3-year transition periods for wage 

index: one for hospitals that, for FY 

2014, were located in an urban county 

that became rural under the new OMB 

delineations, and had no form of wage 

index reclassification or redesignation 

in place for FY 2015 (that is, MGCRB 

reclassifications under section 

1886(d)(10) of the Act, redesignations 

under section 1886(d)(8)(B) of the Act, 

or rural reclassifications under section 

1886(d)(8)(E) of the Act); and one for 

hospitals deemed urban under section 

1886(d)(8)(B) of the Act where the urban 

area became rural under the new OMB 

delineations. In addition, the 1-year 

transition that we applied in FY 2015 

for hospitals that experienced a decrease 

in wage index under the new OMB 

delineations expires at the end of FY 

2015 and does not apply in FY 2016. 

2. Transition for Hospitals in Urban 

Areas That Became Rural 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49957 through 49959), for 

hospitals that, for FY 2014, were located 

in an urban county that became rural 

under the new OMB delineations, and 

had no form of wage index 

reclassification or redesignation in place 

for FY 2015 (that is, MGCRB 

reclassifications under section 

1886(d)(10) of the Act, redesignations 

under section 1886(d)(8)(B) of the Act, 

or rural reclassifications under section 

1886(d)(8)(E) of the Act), we adopted a 

policy to assign them the urban wage 

index value of the CBSA in which they 

are physically located for FY 2014 for a 

period of 3 fiscal years (with the rural 

and imputed floors applied and with the 

rural floor budget neutrality adjustment 

applied to the area wage index). FY 

2016 will represent the second year of 

this transition policy, and we are not 

proposing any changes to this policy in 

this proposed rule. In the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 49957), we 

stated our belief that it is appropriate to 

apply a 3-year transition period for 

hospitals located in urban counties that 

would become rural under the new 

OMB delineations, given the potentially 

significant payment impacts for these 

hospitals. We continue to believe that 

assigning the wage index of the 

hospitals’ FY 2014 area for a 3-year 

transition is the simplest and most 

effective method for mitigating negative 

payment impacts due to the adoption of 

the new OMB delineations. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR49959), we noted that there 

were situations where a hospital could 

not be assigned the wage index value of 

the CBSA in which it geographically 

was located in FY 2014 because that 

CBSA split and no longer exists and 

some or all of the constituent counties 

were added to another urban labor 

market area under the new OMB 

delineations. If the hospital could not be 

assigned the wage index value of the 

CBSA in which it was geographically 

located in FY 2014 because that CBSA 

split apart and no longer exists, and 

some or all of its constituent counties 

were added to another urban labor 

market area under the new OMB 

delineations, we established that 

hospitals located in such counties that 

became rural under the new OMB 

delineations were assigned the wage 

index of the urban labor market area 

that contains the urban county in their 

FY 2014 CBSA to which they are closest 

(with the rural and imputed floors 

applied and with the rural floor budget 

neutrality adjustment applied). Any 

such assignment made in FY 2015 will 

continue for FYs 2016 and 2017, except 

as discussed below. We continue to 

believe this approach minimizes the 

negative effects of the change in the 

OMB delineations. 

Under the policy adopted in the FY 

2015 IPPS/LTCH PPS final rule, if a 

hospital for FY 2014 was located in an 

urban county that became rural for FY 

2015 under the new OMB delineations 

and such hospital sought and was 

granted reclassification or redesignation 

for FY 2015 or such hospital seeks and 

is granted any reclassification or 

redesignation for FY 2016 or FY 2017, 

the hospital will permanently lose its 3- 

year transitional assigned wage index 

status, and will not be eligible to 

reinstate it. We established the 

transition policy to assist hospitals if 

they experience a negative payment 


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impact specifically due to the adoption 

of the new OMB delineations in FY 

2015. If a hospital chooses to forego this 

transition adjustment by obtaining some 

form of reclassification or redesignation, 

we do not believe reinstatement of this 

transition adjustment would be 

appropriate. The purpose of the 

transition adjustment policy is to assist 

hospitals that may be negatively 

impacted by the new OMB delineations 

in transitioning to a wage index based 

on these delineations. By obtaining a 

reclassification or redesignation, we 

believe that the hospital has made the 

determination that the transition 

adjustment is not necessary because it 

has other viable options for mitigating 

the impact of the transition to the new 

OMB delineations. 

As we did for FY 2015 (79 FR 49959), 

with respect to the wage index 

computation for FY 2016, we will 

follow our existing policy regarding the 

inclusion of a hospital’s wage index 

data in the CBSA in which it is 

geographically located (we refer readers 

to Step 6 of the method for computing 

the unadjusted wage index in the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51592)). Accordingly, as we began with 

FY 2015, for FY 2016, the wage data of 

all hospitals receiving this type of 3-year 

transition adjustment will be included 

in the statewide rural area in which they 

are geographically located under the 

new OMB labor market area 

delineations. After the 3-year transition 

period, beginning in FY 2018, these 

formerly urban hospitals discussed 

above will receive their statewide rural 

wage index, absent any reclassification 

or redesignation. 

In addition, we established in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

49959) that the hospitals receiving this 

3-year transition because they are in 

counties that were urban under the FY 

2014 CBSA definitions, but are rural 

under the new OMB delineations, will 

not be considered urban hospitals. 

Rather, they will maintain their status as 

rural hospitals for other payment 

considerations. This is because our 

application of a 3-year transitional wage 

index for these newly rural hospitals 

only applies for the purpose of 

calculating the wage index under our 

adoption of the new OMB delineations. 

We did not establish transitions for 

other IPPS payment policies that may be 

impacted by our adoption of the new 

OMB delineations. 

3. Transition for Hospitals Deemed 

Urban Under Section 1886(d)(8)(B) of 

the Act Where the Urban Area Became 

Rural Under the New OMB Delineations 

As discussed in the FY 2015 IPPS/

LTCH PPS final rule (79 FR 49959 

through 49960), there were some 

hospitals that, for FY 2014, were 

geographically located in rural areas but 

were deemed to be urban under section 

1886(d)(8)(B) of the Act. For FY 2015, 

some of these hospitals redesignated 

under section 1886(d)(8)(B) of the Act 

were no longer eligible for deemed 

urban status under the new OMB 

delineations, as discussed in detail in 

section III.H.3. of the preamble of the FY 

2015 IPPS/LTCH PPS final rule. Similar 

to the policy implemented in the FY 

2005 IPPS final rule (69 FR 49059), and 

consistent with the FY 2015 policy we 

established for other hospitals in 

counties that were urban and became 

rural under the new OMB delineations, 

we finalized a policy to apply a 3-year 

transition to these hospitals 

redesignated to urban areas under 

section 1886(d)(8)(B) of the Act for FY 

2014 that are no longer deemed urban 

under the new OMB delineations and 

revert to being rural. 

For FY 2016, we are not proposing 

any changes to this policy and will 

continue to the second year of the 

implementation of our policy to provide 

a 3-year transition adjustment to 

hospitals that are deemed urban under 

section 1886(d)(8)(B) of the Act under 

the FY 2014 labor market area 

delineations, but are considered rural 

under the new OMB delineations, 

assuming no other form of wage index 

reclassification or redesignation is 

granted. We assign these hospitals the 

area wage index value of hospitals 

reclassified to the urban CBSA (that is, 

the attaching wage index) to which they 

were redesignated in FY 2014 (with the 

rural and imputed floors applied and 

with the rural floor budget neutrality 

adjustment applied). If the hospital 

cannot be assigned the reclassified wage 

index value of the CBSA to which it was 

redesignated in FY 2014 because that 

CBSA was split apart and no longer 

exists, and some or all of its constituent 

counties were added to another urban 

labor market area under the new OMB 

delineations, such hospitals are 

assigned the wage index of the hospitals 

reclassified to the urban labor market 

area that contains the urban county in 

their FY 2014 redesignated CBSA to 

which they are closest. We assign these 

hospitals the area wage index of 

hospitals reclassified to a CBSA because 

hospitals deemed urban under section 

1886(d)(8)(B) of the Act are treated as 

reclassified under current policy, under 

which such hospitals receive an area 

wage index that includes wage data of 

all hospitals reclassified to the area. 

This wage index assignment will be 

forfeited if the hospital obtains any form 

of wage index reclassification or 

redesignation. 

4. Expiring Transition for Hospitals That 

Experience a Decrease in Wage Index 

Under the New OMB Delineations 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49960 through 49962), we 

stated that, while we believe that 

instituting the latest OMB labor market 

area delineations would create a more 

accurate wage index system, we also 

recognized that implementing the latest 

OMB delineations may cause some 

short-term instability in hospital 

payments. Therefore, in addition to the 

3-year transition adjustments for 

hospitals being transitioned from urban 

to rural status as discussed earlier, in 

the FY 2015 IPPS/LTCH PPS final rule, 

we established a 1-year blended wage 

index for all hospitals that would 

experience any decrease in their actual 

payment wage index. This 1-year 

blended wage index expires at the end 

of FY 2015. We are not proposing any 

additional transition adjustment for 

hospitals that experienced a decrease in 

wage index values due to the adoption 

of the new OMB delineations for FY 

2015 but, as discussed previously, will 

continue the 3-year transition 

adjustments for hospitals that changed 

from urban to rural status that we 

finalized in the FY 2015 IPPS/LTCH 

PPS final rule. We established a longer 

3-year transition adjustment for 

hospitals losing urban status because 

there are significantly fewer affected 

urban-to-rural hospitals, and we believe 

the negative impacts to a hospital 

shifting from urban to rural status are 

typically greater than other types of 

transitions. We stated our belief that a 

transition period longer than 1 year to 

address other impacts of the adoption of 

the new OMB delineations would 

reduce the accuracy of the overall labor 

market area wage index system because 

far more hospitals would be affected. 

The 1-year transition for all negatively 

affected hospitals in FY 2015 provided 

an opportunity for hospitals to evaluate 

potential reclassification options, and 

mitigated initial negative impacts due to 

labor market assignment changes. We 

continue to believe that the adoption of 

the latest labor market delineations 

improves the accuracy and integrity of 

the hospital wage index system. 

Therefore, we believe it is necessary to 

allow this transition adjustment to 

expire. 


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5. Budget Neutrality 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50372 through 50373), for 

FY 2015, we applied the 3-year 

transition and 50/50 blended wage 

index adjustments in a budget neutral 

manner. For FY 2016, we are proposing 

to apply the 3-year transition 

adjustments in a budget neutral manner. 

We are proposing to make an 

adjustment to the standardized amount 

to ensure that the total payments, 

including the effect of the transition 

provisions, would equal what payments 

would have been if we would not be 

providing for any transitional wage 

indexes under the new OMB 

delineations. For a complete discussion 

on the proposed budget neutrality 

adjustment for FY 2016, we refer readers 

to section II.A.4.b. of the Addendum to 

this proposed rule. 

H. Proposed Application of the 

Proposed Rural, Imputed, and Frontier 

Floors 

1. Proposed Rural Floor 

Section 4410(a) of Public Law 105–33 

provides that, for discharges on or after 

October 1, 1997, the area wage index 

applicable to any hospital that is located 

in an urban area of a State may not be 

less than the area wage index applicable 

to hospitals located in rural areas in that 

State. This provision is referred to as the 

‘‘rural floor.’’ Section 3141 of Public 

Law 111–148 also requires that a 

national budget neutrality adjustment be 

applied in implementing the rural floor. 

Based on the proposed FY 2016 wage 

index associated with this proposed 

rule, we estimated that 459 hospitals 

would receive an increase in their FY 

2016 proposed wage index due to the 

application of the rural floor. 

2. Proposed Imputed Floor for FY 2016 

In the FY 2005 IPPS final rule (69 FR 

49109 through 49111), we adopted the 

‘‘imputed floor’’ policy as a temporary 

3-year regulatory measure to address 

concerns from hospitals in all-urban 

States that have argued that they are 

disadvantaged by the absence of rural 

hospitals to set a wage index floor for 

those States. Since its initial 

implementation, we have extended the 

imputed floor policy five times, the last 

of which was adopted in the FY 2015 

IPPS/LTCH PPS final rule and is set to 

expire on September 30, 2015. (We refer 

readers to further discussions of the 

imputed floor in the FY 2014 and FY 

2015 IPPS/LTCH PPS final rules (78 FR 

50589 through 50590 and 79 FR 49969 

through 49970, respectively) and to the 

regulations at 42 CFR 412.64(h)(4).) 

Currently, there are three all-urban 

States, Delaware, New Jersey, and 

Rhode Island, with a range of wage 

indexes assigned to hospitals in these 

States, including through 

reclassification or redesignation (we 

refer readers to discussions of 

geographic reclassifications and 

redesignations in section III.J. of the 

preamble of this proposed rule). 

In computing the imputed floor for an 

all-urban State under the original 

methodology, which was established 

beginning in FY 2005, we calculated the 

ratio of the lowest-to-highest CBSA 

wage index for each all-urban State as 

well as the average of the ratios of 

lowest-to-highest CBSA wage indexes of 

those all-urban States. We then 

compared the State’s own ratio to the 

average ratio for all-urban States and 

whichever is higher is multiplied by the 

highest CBSA wage index value in the 

State—the product of which established 

the imputed floor for the State. As of FY 

2012, there were only two all-urban 

States, New Jersey and Rhode Island, 

and only New Jersey benefitted under 

this methodology. Under the previous 

OMB labor market area delineations, 

Rhode Island had only one CBSA 

(Providence-New Bedford-Fall River, RIMA) and New Jersey had 10 CBSAs. 

Therefore, under the original 

methodology, Rhode Island’s own ratio 

equaled 1.0, and its imputed floor was 

equal to its original CBSA wage index 

value. However, because the average 

ratio of New Jersey and Rhode Island 

was higher than New Jersey’s own ratio, 

this methodology provided a benefit for 

New Jersey, but not for Rhode Island. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53368 through 53369), we 

retained the imputed floor calculated 

under the original methodology as 

discussed above, and established an 

alternative methodology for computing 

the imputed floor wage index to address 

the concern that the original imputed 

floor methodology guaranteed a benefit 

for one all-urban State with multiple 

wage indexes (New Jersey) but could not 

benefit the other all-urban State (Rhode 

Island). The alternative methodology for 

calculating the imputed floor was 

established using data from the 

application of the rural floor policy for 

FY 2013. Under the alternative 

methodology, we first determined the 

average percentage difference between 

the post-reclassified, pre-floor area wage 

index and the post-reclassified, rural 

floor wage index (without rural floor 

budget neutrality applied) for all CBSAs 

receiving the rural floor. (Table 2 

(formerly Table 4D) associated with the 

FY 2013 IPPS/LTCH PPS final rule, 

which is available via the Internet on 

the CMS Web site, included the CBSAs 

receiving a State’s rural floor wage 

index.) The lowest post-reclassified 

wage index assigned to a hospital in an 

all-urban State having a range of such 

values then is increased by this factor, 

the result of which establishes the 

State’s alternative imputed floor. We 

amended § 412.64(h)(4) of the 

regulations to add new paragraphs to 

incorporate the finalized alternative 

methodology, and to make reference and 

date changes. In summary, for the FY 

2013 wage index, we did not make any 

changes to the original imputed floor 

methodology at § 412.64(h)(4) and, 

therefore, made no changes to the New 

Jersey imputed floor computation for FY 

2013. Instead, for FY 2013, we adopted 

a second, alternative methodology for 

use in cases where an all-urban State 

has a range of wage indexes assigned to 

its hospitals, but the State cannot 

benefit under the original methodology. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50589 through 50590), we 

extended the imputed floor policy (both 

the original methodology and the 

alternative methodology) for 1 

additional year, through September 30, 

2014, while we continued to explore 

potential wage index reforms. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49969 through 49970), for 

FY 2015, we adopted a policy to extend 

the imputed floor policy (both the 

original methodology and alternative 

methodology) for another year, through 

September 30, 2015, as we continued to 

explore potential wage index reforms. In 

that final rule, we revised the 

regulations at § 412.64(h)(4) and 

(h)(4)(vi) to reflect the 1-year extension 

of the imputed floor. 

As discussed in section III.B. of the 

preamble of that FY 2015 final rule, we 

adopted the new OMB labor market area 

delineations beginning in FY 2015. 

Under the new OMB delineations, 

Delaware became an all-urban State, 

along with New Jersey and Rhode 

Island. Under the new OMB 

delineations, Delaware has three CBSAs, 

New Jersey has seven CBSAs, and 

Rhode Island continues to have only 

one CBSA (Providence-Warwick, RIMA). We refer readers to a detailed 

discussion of our adoption of the new 

OMB labor market area delineations in 

section III.B. of the preamble of the FY 

2015 IPPS/LTCH PPS final rule. 

Therefore, under the adopted new OMB 

delineations discussed in section III.B. 

of the preamble of the FY 2015 IPPS/

LTCH PPS final rule, Delaware became 

an all-urban State and was subject to an 

imputed floor as well for FY 2015. 

For FY 2016, we are proposing to 

extend the imputed floor policy (both 

the original methodology and the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24470 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

alternative methodology) for 1 

additional year, through September 30, 

2016, while we continue to explore 

potential wage index reforms. We are 

proposing to revise the regulations at 

§ 412.64(h)(4) and (h)(4)(vi) to reflect 

this proposed additional 1-year 

extension. We are inviting public 

comments on the proposed additional 1- 

year extension of the imputed floor 

through September 30, 2016. 

The wage index and impact tables 

associated with this FY 2016 IPPS/

LTCH PPS proposed rule (which are 

available via the Internet on the CMS 

Web site) reflect the proposed continued 

application of the imputed floor policy 

at § 412.64(h)(4) and a proposed 

national budget neutrality adjustment 

for the imputed floor for FY 2016. There 

are 16 providers in New Jersey, and no 

providers in Delaware that would 

receive an increase in their proposed FY 

2016 wage index due to the proposed 

continued application of the imputed 

floor policy under the original 

methodology and 4 hospitals in Rhode 

Island that would benefit under the 

alternative methodology. 

3. Proposed State Frontier Floor 

Section 10324 of Public Law 111–148 

requires that hospitals in frontier States 

cannot be assigned a wage index of less 

than 1.0000 (we refer readers to 

regulations at 42 CFR 412.64(m) and to 

a discussion of the implementation of 

this provision in the FY 2011 IPPS/

LTCH PPS final rule (75 FR 50160 

through 50161)). Forty-seven hospitals 

would receive the frontier floor value of 

1.0000 for their FY 2016 wage index in 

this proposed rule. These hospitals are 

located in Montana, North Dakota, 

South Dakota, and Wyoming. Although 

Nevada also is defined as a frontier 

State, its proposed FY 2016 rural floor 

value of 1.0300 is greater than 1.0000, 

and therefore, no Nevada hospitals 

would receive a frontier floor value for 

their FY 2016 wage index. We are not 

proposing any changes to the frontier 

floor policy for FY 2016. 

The areas affected by the proposed 

rural, imputed, and frontier floor 

policies for the proposed FY 2016 wage 

index are identified in Table 2 (formerly 

Table 4D) associated with this proposed 

rule, which is available via the Internet 

on the CMS Web site. 

I. Proposed FY 2016 Wage Index Tables 

We are proposing to streamline and 

consolidate the wage index tables 

associated with the IPPS proposed and 

final rules for FY 2016 and subsequent 

fiscal years. The wage index tables have 

consisted of 12 tables (Tables 2, 3A, 3B, 

4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) 

that are made available via the Internet 

on the CMS Web site. However, with the 

exception of Table 4E, we are proposing 

to streamline and consolidate these 11 

tables into 2 tables. We refer readers to 

section VI. of the Addendum to this 

proposed rule for a discussion of the 

proposed revisions to the wage index 

tables. 

J. Revisions to the Wage Index Based on 

Hospital Redesignations and 

Reclassifications 

1. General Policies and Effects of 

Reclassification and Redesignation 

Under section 1886(d)(10) of the Act, 

the MGCRB considers applications by 

hospitals for geographic reclassification 

for purposes of payment under the IPPS. 

Hospitals must apply to the MGCRB to 

reclassify not later than 13 months prior 

to the start of the fiscal year for which 

reclassification is sought (generally by 

September 1). Generally, hospitals must 

be proximate to the labor market area to 

which they are seeking reclassification 

and must demonstrate characteristics 

similar to hospitals located in that area. 

The MGCRB issues its decisions by the 

end of February for reclassifications that 

become effective for the following fiscal 

year (beginning October 1). The 

regulations applicable to 

reclassifications by the MGCRB are 

located in 42 CFR 412.230 through 

412.280. (We refer readers to a 

discussion in the FY 2002 IPPS/LTCH 

PPS final rule (66 FR 39874 and 39875) 

regarding how the MGCRB defines 

mileage for purposes of the proximity 

requirements.) The general policies for 

reclassifications and redesignations that 

we are proposing for FY 2016, and the 

policies for the effects of hospitals’ 

reclassifications and redesignations on 

the wage index, are the same as those 

discussed in the FY 2012 IPPS/LTCH 

PPS final rule for the FY 2012 final 

wage index (76 FR 51595 and 51596). In 

addition, in the FY 2012 IPPS/LTCH 

PPS final rule, we discussed the effects 

on the wage index of urban hospitals 

reclassifying to rural areas under 42 CFR 

412.103. Hospitals that are 

geographically located in States without 

any rural areas are ineligible to apply for 

rural reclassification in accordance with 

the provisions of 42 CFR 412.103. 

2. FY 2016 MGCRB Reclassifications 

a. FY 2016 Reclassification 

Requirements and Approvals 

Under section 1886(d)(10) of the Act, 

the MGCRB considers applications by 

hospitals for geographic reclassification 

for purposes of payment under the IPPS. 

The specific procedures and rules that 

apply to the geographic reclassification 

process are outlined in regulations 

under 42 CFR 412.230 through 412.280. 

At the time this proposed rule was 

constructed, the MGCRB had completed 

its review of FY 2016 reclassification 

requests. Based on such reviews, there 

are 285 hospitals approved for wage 

index reclassifications by the MGCRB 

starting in FY 2016. Because MGCRB 

wage index reclassifications are 

effective for 3 years, for FY 2016, 

hospitals reclassified beginning in FY 

2014 or FY 2015 are eligible to continue 

to be reclassified to a particular labor 

market area based on such prior 

reclassifications for the remainder of 

their 3-year period. There were 275 

hospitals approved for wage index 

reclassifications in FY 2014 that 

continue for FY 2016, and 312 hospitals 

approved for wage index 

reclassifications in FY 2015 that 

continue for FY 2016. Of all the 

hospitals approved for reclassification 

for FY 2014, FY 2015, and FY 2016, 

based upon the review at the time of 

this proposed rule, 872 hospitals are in 

a reclassification status for FY 2016. 

Under the regulations at 42 CFR 

412.273, hospitals that have been 

reclassified by the MGCRB are 

permitted to withdraw their 

applications within 45 days of the 

publication of a proposed rule. For 

information about withdrawing, 

terminating, or canceling a previous 

withdrawal or termination of a 3-year 

reclassification for wage index 

purposes, we refer readers to 42 CFR 

412.273, as well as the FY 2002 IPPS 

final rule (66 FR 39887 through 39888) 

and the FY 2003 IPPS final rule (67 FR 

50065 through 50066). Additional 

discussion on withdrawals and 

terminations, and clarifications 

regarding reinstating reclassifications 

and ‘‘fallback’’ reclassifications, were 

included in the FY 2008 IPPS final rule 

(72 FR 47333). 

Changes to the wage index that result 

from withdrawals of requests for 

reclassification, terminations, wage 

index corrections, appeals, and the 

Administrator’s review process for FY 

2016 will be incorporated into the wage 

index values published in the FY 2016 

IPPS/LTCH PPS final rule. These 

changes affect not only the wage index 

value for specific geographic areas, but 

also the wage index value that 

redesignated/reclassified hospitals 

receive; that is, whether they receive the 

wage index that includes the data for 

both the hospitals already in the area 

and the redesignated/reclassified 

hospitals. Further, the wage index value 

for the area from which the hospitals are 

redesignated/reclassified may be 

affected. 


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b. Applications for Reclassifications for 

FY 2017 

Applications for FY 2017 

reclassifications are due to the MGCRB 

by September 1, 2015 (the first working 

day of September 2015). We note that 

this is also the deadline for canceling a 

previous wage index reclassification 

withdrawal or termination under 42 

CFR 412.273(d). Applications and other 

information about MGCRB 

reclassifications may be obtained, 

beginning in mid-July 2015, via the 

Internet on the CMS Web site at: http:// 

cms.gov/Regulations-andGuidance/

Review-Boards/MGCRB/index.html, or 

by calling the MGCRB at (410) 786– 

1174. The mailing address of the 

MGCRB is: 2520 Lord Baltimore Drive, 

Suite L, Baltimore, MD 21244–2670. 

3. Redesignation of Hospitals Under 

Section 1886(d)(8)(B) of the Act 

Section 1886(d)(8)(B)(i) of the Act 

requires the Secretary to treat a hospital 

located in a rural county adjacent to one 

or more urban areas as being located in 

the urban metropolitan statistical area to 

which the greatest number of workers in 

the county commute if certain adjacency 

and commuting criteria are met. The 

criteria utilize standards for designating 

Metropolitan Statistical Areas published 

in the Federal Register by the Director 

of the Office of Management and Budget 

(OMB) based on the most recently 

available decennial population data. 

Effective beginning FY 2015, we used 

the new OMB delineations based on the 

2010 Decennial Census data to identify 

counties in which hospitals qualify 

under section 1886(d)(8)(B) of the Act to 

receive the wage index of the urban 

area. Hospitals located in these counties 

are referred to as ‘‘Lugar’’ hospitals and 

the counties themselves are often 

referred to as ‘‘Lugar’’ counties. The 

chart for this FY 2016 proposed rule 

with the listing of the rural counties 

containing the hospitals designated as 

urban under section 1886(d)(8)(B) of the 

Act is available via the Internet on the 

CMS Web site. 

4. Waiving Lugar Redesignation for the 

Out-Migration Adjustment 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51599 through 51600), we 

adopted the policy that, beginning with 

FY 2012, an eligible hospital that waives 

its Lugar status in order to receive the 

out-migration adjustment has effectively 

waived its deemed urban status and, 

thus, is rural for all purposes under the 

IPPS, including being considered rural 

for the DSH payment adjustment, 

effective for the fiscal year in which the 

hospital receives the out-migration 

adjustment. (We refer readers to a 

discussion of DSH payment adjustment 

under section IV.D. of the preamble of 

this proposed rule.) 

In addition, we adopted a minor 

procedural change in that rule that 

allows a Lugar hospital that qualifies for 

and accepts the out-migration 

adjustment (through written notification 

to CMS within 45 days from the 

publication of the proposed rule) to 

waive its urban status for the full 3-year 

period for which its out-migration 

adjustment is effective. By doing so, 

such a Lugar hospital would no longer 

be required during the second and third 

years of eligibility for the out-migration 

adjustment to advise us annually that it 

prefers to continue being treated as rural 

and receive the out-migration 

adjustment. Therefore, under the 

procedural change, a Lugar hospital that 

requests to waive its urban status in 

order to receive the rural wage index in 

addition to the out-migration 

adjustment would be deemed to have 

accepted the out-migration adjustment 

and agrees to be treated as rural for the 

duration of its 3-year eligibility period, 

unless, prior to its second or third year 

of eligibility, the hospital explicitly 

notifies CMS in writing, within the 

required period (generally 45 days from 

the publication of the proposed rule), 

that it instead elects to return to its 

deemed urban status and no longer 

wishes to accept the out-migration 

adjustment. If the hospital does notify 

CMS that it is electing to return to its 

deemed urban status, it would again be 

treated as urban for all IPPS payment 

purposes. 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51599 

through 51600) for a detailed discussion 

of the policy and process for waiving 

Lugar status for the out-migration 

adjustment. 

K. Proposed Out-Migration Adjustment 

Based on Commuting Patterns of 

Hospital Employees 

1. Background 

In accordance with section 

1886(d)(13) of the Act, as added by 

section 505 of Public Law 108–173, 

beginning with FY 2005, we established 

a process to make adjustments to the 

hospital wage index based on 

commuting patterns of hospital 

employees (the ‘‘out-migration’’ 

adjustment). The process, outlined in 

the FY 2005 IPPS final rule (69 FR 

49061), provides for an increase in the 

wage index for hospitals located in 

certain counties that have a relatively 

high percentage of hospital employees 

who reside in the county but work in a 

different county (or counties) with a 

higher wage index. 

2. New Data Source for the Proposed FY 

2016 Out-Migration Adjustment 

When the provision of section 

1886(d)(13) of the Act was implemented 

for the FY 2005 wage index, we 

analyzed commuting data compiled by 

the U.S. Census Bureau which was 

derived from a special tabulation of the 

2000 Census journey-to-work data for all 

industries (CMS extracted data 

applicable to hospitals). These data 

were compiled from responses to the 

‘‘long-form’’ survey, which the Census 

Bureau used at the time and which 

contained questions on where residents 

in each county worked (69 FR 49062). 

However, the 2010 Census was ‘‘short 

form’’ only; information on where 

residents in each county worked was 

not collected as part of the 2010 Census. 

The Census Bureau worked with CMS to 

provide an alternative dataset based on 

the latest available data on where 

residents in each county worked in 

2010, for use in developing a new outmigration adjustment based on new 

commuting patterns developed from the 

2010 Census data beginning with FY 

2016. We have reviewed and analyzed 

the alternative dataset from the Census 

Bureau and are proposing new outmigration adjustments in this FY 2016 

proposed rule, as discussed below (as 

we indicated we would in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 49984 

through 49985). 

To determine the new out-migration 

adjustments and applicable counties 

that we are proposing for FY 2016, we 

analyzed commuting data compiled by 

the Census Bureau that were derived 

from a custom tabulation of the 

American Community Survey (ACS), an 

official Census Bureau survey, utilizing 

2008 through 2012 (5-Year) Microdata. 

The data were compiled from responses 

to the ACS questions regarding the 

county where workers reside and the 

county to which workers commute. The 

tabulation was specific to hospital 

military and civilian employees 

(hospital sector Census code 8190/

NAICS code 622) who worked in the 50 

States, Washington, DC, and Puerto Rico 

and, therefore, provided information 

about commuting patterns of workers at 

the county level for residents of the 50 

States, Washington, DC, and Puerto 

Rico. For the ACS, the Census Bureau 

selects a random sample of addresses 

where workers reside to be included in 

the survey, and the sample is designed 

to ensure good geographic coverage. The 

ACS samples approximately 3.54 

million resident addresses per year. The 

results of the ACS are used to formulate 


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descriptive population estimates, and, 

as such, the sample on which the 

dataset is based represents the actual 

figures that would be obtained from a 

complete count. 

3. Proposed FY 2016 Out-Migration 

Adjustment 

Section 1886(d)(13)(B) of the Act 

requires the Secretary to use data the 

Secretary determines to be appropriate 

to establish the qualifying counties. For 

FY 2016 and subsequent years, until 

such time that CMS finalizes outmigration adjustments based on the next 

Census, we are proposing that the outmigration adjustment be based on the 

data derived from the custom tabulation 

of the ACS described in section III.K.2. 

of the preamble of this proposed rule. 

As discussed above, we believe that 

these data are the most appropriate to 

establish qualifying counties because 

they are the most accurate and up-todate data that are available to us. We are 

proposing that the FY 2016 outmigration adjustments continue to be 

based on the same policies, procedures, 

and computation that were used for the 

FY 2012 out-migration adjustment. We 

have applied these same policies, 

procedures, and computations since FY 

2012 and we believe they continue to be 

appropriate for FY 2016. (We refer 

readers to a full discussion of the outmigration adjustment, including rules 

on deeming hospitals reclassified under 

section 1886(d)(8) or section 1886(d)(10) 

of the Act to have waived the outmigration adjustment, in the FY 2012 

IPPS/LTCH PPS final rule (76 FR 51601 

through 51602).) Table 2 (formerly Table 

4J) associated with this proposed rule 

(which is available via the Internet on 

the CMS Web site) lists the proposed 

out-migration adjustments for the FY 

2016 wage index. 

4. Use of Out-Migration Adjustment 

Data Applied for FY 2014 or FY 2015 for 

3 Years 

Section 1886(d)(13)(F) of the Act 

states that a wage index increase under 

this paragraph shall be effective for a 

period of 3 fiscal years, except that the 

Secretary shall establish procedures 

under which a subsection (d) hospital 

may elect to waive the application of 

such wage index increase. In the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

49984 through 49985), we stated that 

even if we proposed to adopt new outmigration adjustment data for FY 2016, 

hospitals that are already receiving an 

out-migration adjustment beginning 

with a fiscal year prior to FY 2016 

would still receive their out-migration 

adjustment based on the data used prior 

to FY 2016 for the years that remain of 

their 3-year qualification period in FY 

2016 and after. Therefore, for FY 2016, 

hospitals that qualified in FY 2014 or 

FY 2015 to receive the out-migration 

adjustment based on the commuting 

data and the CBSA delineations used for 

FY 2014 will continue to receive the 

same out-migration adjustment for the 

remainder of their 3-year qualification 

period. For example, if a hospital 

qualified for the out-migration 

adjustment in FY 2014, but also would 

qualify in FY 2016 under the proposed 

new commuting patterns and the new 

OMB labor market area delineations for 

FY 2016, this hospital will still receive 

the out-migration adjustment based on 

the commuting data and the CBSA 

delineations used for FY 2014, 

regardless of whether the FY 2016 

adjustment would be higher or lower 

than the adjustment based on FY 2014 

data. If the hospital qualifies in FY 2017 

(after the expiration of the 3-year 

qualifying period for the out-migration 

adjustment, which began in FY 2014) to 

receive the out-migration adjustment 

based on the new commuting data and 

OMB delineations in effect in FY 2017, 

it could receive the out-migration 

adjustment based on the new data for 

FYs 2017, 2018, and 2019. Conversely, 

for example, if a hospital qualified for 

the out-migration adjustment in FY 

2014, but would not qualify in FY 2016 

under the proposed new commuting 

patterns and the new OMB delineations 

for FY 2016, this hospital will still 

receive the out-migration adjustment 

based on the commuting data and the 

CBSA delineations used for FY 2014. 

Based on the new out-migration 

adjustment data used for this proposed 

rule, 325 hospitals would receive the 

out-migration adjustment for FY 2016. 

Of hospitals that were eligible for the 

out-migration adjustment for FY 2015 

but whose 3-year qualifying period for 

the out-migration adjustment expired, 5 

hospitals are no longer eligible for the 

out-migration adjustment under the new 

data (3 hospitals in Alabama, 1 hospital 

in Missouri, and 1 hospital in Ohio). Of 

the 325 hospitals, the out-migration 

adjustment of 243 hospitals would be 

unaffected, as these hospitals would 

receive the same out-migration 

adjustment because they are still within 

an existing 3-year eligibility period 

under the previous out-migration 

adjustment data. Of the 243 hospitals, 8 

hospitals would have received a higher 

out-migration adjustment using the new 

data (1 hospital in Alabama, 2 hospitals 

in Massachusetts, 1 hospital in 

Michigan, and 4 hospitals in 

Pennsylvania) and 4 hospitals would 

have received a lower out-migration 

using the new data (1 hospital in Idaho, 

2 hospitals in Oregon, and 1 hospital in 

South Carolina). Eighty-two hospitals 

would be newly eligible for the outmigration adjustment in FY 2016 using 

the new data. The following table shows 

the States and Territory in which the 82 

affected hospitals are located: 

State 

Number of 

hospitals that 

would be 

newly eligible 

under the new 

out-migration 

data for FY 

2016 

Alabama ................................ 2 

Arizona .................................. 2 

California ............................... 6 

Florida ................................... 3 

Georgia ................................. 8 

Idaho ..................................... 1 

Illinois .................................... 1 

Indiana .................................. 3 

Kansas .................................. 1 

Louisiana .............................. 5 

Maine .................................... 1 

Massachusetts ...................... 0 

Michigan ............................... 2 

Minnesota ............................. 1 

Mississippi ............................ 3 

Missouri ................................ 1 

North Carolina ...................... 4 

Ohio ...................................... 4 

Oklahoma ............................. 2 

Oregon .................................. 0 

Pennsylvania ........................ 3 

Puerto Rico ........................... 5 

South Carolina ...................... 1 

Tennessee ............................ 4 

Texas .................................... 6 

Vermont ................................ 1 

Washington ........................... 5 

West Virginia ........................ 4 

Wisconsin ............................. 3 

Totals ............................. 82 

L. Process for Requests for Wage Index 

Data Corrections 

The preliminary, unaudited 

Worksheet S–3 wage data files for the 

proposed FY 2016 wage index were 

made available on May 23, 2014, and 

the preliminary CY 2013 occupational 

mix data files on July 11, 2014, through 

the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/Wage-Index-FilesItems/FY-2016-Wage-Index-HomePage.html. 

In the interest of meeting the data 

needs of the public, beginning with the 

proposed FY 2009 wage index, we post 

an additional public use file on our Web 

site that reflects the actual data that are 

used in computing the proposed wage 

index. The release of this file does not 

alter the current wage index process or 

schedule. We notify the hospital 


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community of the availability of these 

data as we do with the current public 

use wage data files through our Hospital 

Open Door Forum. We encourage 

hospitals to sign up for automatic 

notifications of information about 

hospital issues and about the dates of 

the Hospital Open Door Forums at the 

CMS Web site at: http://www.cms.gov/

Outreach-and-Education/Outreach/

OpenDoorForums/index.html. 

In a memorandum dated April 7, 

2014, we instructed all MACs to inform 

the IPPS hospitals they service of the 

availability of the wage index data files 

and the process and timeframe for 

requesting revisions (including the 

specific deadlines listed below). We also 

instructed the MACs to advise hospitals 

that these data were also made available 

directly through their representative 

hospital organizations. 

If a hospital wished to request a 

change to its data as shown in the May 

23, 2014 wage data files and July 11, 

2014 occupational mix data files, the 

hospital was to submit corrections along 

with complete, detailed supporting 

documentation to its MAC by October 6, 

2014. Hospitals were notified of this 

deadline and of all other deadlines and 

requirements, including the requirement 

to review and verify their data as posted 

in the preliminary wage index data files 

on the Internet, through the April 7, 

2014 memorandum referenced above. 

The MACs notified the hospitals by 

mid-February 2015 of any changes to 

the wage index data as a result of the 

desk reviews and the resolution of the 

hospitals’ early-October revision 

requests. The MACs also submitted the 

revised data to CMS by December 16, 

2014. CMS published the proposed 

wage index public use files that 

included hospitals’ revised wage index 

data on February 13, 2015. Hospitals 

had until March 2, 2015, to submit 

requests to the MACs for 

reconsideration of adjustments made by 

the MACs as a result of the desk review, 

and to correct errors due to CMS’ or the 

MAC’s mishandling of the wage index 

data. Hospitals also were required to 

submit sufficient documentation to 

support their requests. 

After reviewing requested changes 

submitted by hospitals, MACs were 

required to transmit to CMS any 

additional revisions resulting from the 

hospitals’ reconsideration requests by 

April 8, 2015. The deadline for a 

hospital to request CMS intervention in 

cases where the hospital disagreed with 

the MAC’s policy interpretations was 

April 15, 2015. We note that, as we did 

for the FY 2015 wage index, for the FY 

2016 wage index, in accordance with 

the FY 2016 wage index timeline posted 

on the CMS Web site at http://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/

AcuteInpatientPPS/Downloads/FY2016- 

WI-Time-Table-Final.pdf, the April 

appeals had to be sent via mail and 

email. We refer readers to the wage 

index timeline for complete details. 

Hospitals should examine Table 2, 

which is listed in section VI. of the 

Addendum to this proposed rule and 

available via the Internet on the CMS 

Web site at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY-2016-Wage-IndexHome-Page.html. Table 2 contains each 

hospital’s proposed adjusted average 

hourly wage used to construct the wage 

index values for the past 3 years, 

including the FY 2012 data used to 

construct the proposed FY 2016 wage 

index. We noted that the proposed 

hospital average hourly wages shown in 

Table 2 only reflect changes made to a 

hospital’s data that were transmitted to 

CMS by February 27, 2015. 

We will release the final wage index 

data public use files on May 1, 2015 on 

the Internet at: http://www.cms.gov/

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/WageIndex-Files-Items/FY-2016-Wage-IndexHome-Page.html. The May 2015 public 

use files are made available solely for 

the limited purpose of identifying any 

potential errors made by CMS or the 

MAC in the entry of the final wage 

index data that resulted from the 

correction process described above 

(revisions submitted to CMS by the 

MACs by April 8, 2015). 

After the release of the May 2015 

wage index data files, changes to the 

wage and occupational mix data will 

only be made in those very limited 

situations involving an error by the 

MAC or CMS that the hospital could not 

have known about before its review of 

the final wage index data files. 

Specifically, neither the MAC nor CMS 

will approve the following types of 

requests: 

• Requests for wage index data 

corrections that were submitted too late 

to be included in the data transmitted to 

CMS by the MACs on or before April 8, 

2015. 

• Requests for correction of errors 

that were not, but could have been, 

identified during the hospital’s review 

of the February 13, 2015 wage index 

public use files. 

• Requests to revisit factual 

determinations or policy interpretations 

made by the MAC or CMS during the 

wage index data correction process. 

If, after reviewing the May 2015 final 

public use files, a hospital believes that 

its wage or occupational mix data are 

incorrect due to a MAC or CMS error in 

the entry or tabulation of the final data, 

the hospital should notify both its MAC 

and CMS regarding why the hospital 

believes an error exists and provide all 

supporting information, including 

relevant dates (for example, when it first 

became aware of the error). The hospital 

is required to send its request to CMS 

and to the MAC no later than June 1, 

2015. Similar to the April appeals, 

beginning with the FY 2015 wage index, 

in accordance with the FY 2016 wage 

index timeline posted on the CMS Web 

site at http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/Downloads/FY2016- 

WI-Time-Table-Final.pdf, the June 

appeals are required to be sent via mail 

and email to CMS and the MACs. We 

refer readers to the wage index timeline 

for complete details. 

Verified corrections to the wage index 

data received timely by CMS and the 

MACs (that is, by June 1, 2015) will be 

incorporated into the final wage index 

in the FY 2016 IPPS/LTCH PPS final 

rule, which will be effective October 1, 

2015. 

We created the processes described 

above to resolve all substantive wage 

index data correction disputes before we 

finalize the wage and occupational mix 

data for the FY 2016 payment rates. 

Accordingly, hospitals that do not meet 

the procedural deadlines set forth above 

will not be afforded a later opportunity 

to submit wage index data corrections or 

to dispute the MAC’s decision with 

respect to requested changes. 

Specifically, our policy is that hospitals 

that do not meet the procedural 

deadlines set forth above will not be 

permitted to challenge later, before the 

PRRB, the failure of CMS to make a 

requested data revision. We refer 

readers also to the FY 2000 IPPS final 

rule (64 FR 41513) for a discussion of 

the parameters for appeals to the PRRB 

for wage index data corrections. 

Again, we believe the wage index data 

correction process described above 

provides hospitals with sufficient 

opportunity to bring errors in their wage 

and occupational mix data to the MAC’s 

attention. Moreover, because hospitals 

have access to the final wage index data 

by May 1, 2015, they have the 

opportunity to detect any data entry or 

tabulation errors made by the MAC or 

CMS before the development and 

publication of the final FY 2016 wage 

index by August 2015, and the 

implementation of the FY 2016 wage 

index on October 1, 2015. Given these 

processes, the wage index implemented 

on October 1 should be accurate. 

Nevertheless, in the event that errors are 


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identified by hospitals and brought to 

our attention after June 1, 2015, we 

retain the right to make midyear 

changes to the wage index under very 

limited circumstances. 

Specifically, in accordance with 42 

CFR 412.64(k)(1) of our regulations, we 

make midyear corrections to the wage 

index for an area only if a hospital can 

show that: (1) The MAC or CMS made 

an error in tabulating its data; and (2) 

the requesting hospital could not have 

known about the error or did not have 

an opportunity to correct the error, 

before the beginning of the fiscal year. 

For purposes of this provision, ‘‘before 

the beginning of the fiscal year’’ means 

by the June deadline for making 

corrections to the wage data for the 

following fiscal year’s wage index (for 

example, June 1, 2015, for the FY 2016 

wage index). This provision is not 

available to a hospital seeking to revise 

another hospital’s data that may be 

affecting the requesting hospital’s wage 

index for the labor market area. As 

indicated earlier, because CMS makes 

the wage index data available to 

hospitals on the CMS Web site prior to 

publishing both the proposed and final 

IPPS rules, and the MACs notify 

hospitals directly of any wage index 

data changes after completing their desk 

reviews, we do not expect that midyear 

corrections will be necessary. However, 

under our current policy, if the 

correction of a data error changes the 

wage index value for an area, the 

revised wage index value will be 

effective prospectively from the date the 

correction is made. 

In the FY 2006 IPPS final rule (70 FR 

47385 through 47387 and 47485), we 

revised 42 CFR 412.64(k)(2) to specify 

that, effective on October 1, 2005, that 

is, beginning with the FY 2006 wage 

index, a change to the wage index can 

be made retroactive to the beginning of 

the Federal fiscal year only when CMS 

determines all of the following: (1) The 

MAC or CMS made an error in 

tabulating data used for the wage index 

calculation; (2) the hospital knew about 

the error and requested that the MAC 

and CMS correct the error using the 

established process and within the 

established schedule for requesting 

corrections to the wage index data, 

before the beginning of the fiscal year 

for the applicable IPPS update (that is, 

by the June 1, 2015 deadline for the FY 

2016 wage index); and (3) CMS agreed 

before October 1 that the MAC or CMS 

made an error in tabulating the 

hospital’s wage index data and the wage 

index should be corrected. 

In those circumstances where a 

hospital requested a correction to its 

wage index data before CMS calculated 

the final wage index (that is, by the June 

1, 2015 deadline for the FY 2016 wage 

index), and CMS acknowledges that the 

error in the hospital’s wage index data 

was caused by CMS’ or the MAC’s 

mishandling of the data, we believe that 

the hospital should not be penalized by 

our delay in publishing or 

implementing the correction. As with 

our current policy, we indicated that the 

provision is not available to a hospital 

seeking to revise another hospital’s data. 

In addition, the provision cannot be 

used to correct prior years’ wage index 

data; and it can only be used for the 

current Federal fiscal year. In situations 

where our policies would allow midyear 

corrections other than those specified in 

42 CFR 412.64(k)(2)(ii), we continue to 

believe that it is appropriate to make 

prospective-only corrections to the wage 

index. 

We note that, as with prospective 

changes to the wage index, the final 

retroactive correction will be made 

irrespective of whether the change 

increases or decreases a hospital’s 

payment rate. In addition, we note that 

the policy of retroactive adjustment will 

still apply in those instances where a 

final judicial decision reverses a CMS 

denial of a hospital’s wage index data 

revision request. 

M. Labor-Related Share for the Proposed 

FY 2016 Wage Index 

Section 1886(d)(3)(E) of the Act 

directs the Secretary to adjust the 

proportion of the national prospective 

payment system base payment rates that 

are attributable to wages and wagerelated costs by a factor that reflects the 

relative differences in labor costs among 

geographic areas. It also directs the 

Secretary to estimate from time to time 

the proportion of hospital costs that are 

labor-related: ‘‘The Secretary shall 

adjust the proportion (as estimated by 

the Secretary from time to time) of 

hospitals’ costs which are attributable to 

wages and wage-related costs of the 

DRG prospective payment rates. . . .’’ 

We refer to the portion of hospital costs 

attributable to wages and wage-related 

costs as the labor-related share. The 

labor-related share of the prospective 

payment rate is adjusted by an index of 

relative labor costs, which is referred to 

as the wage index. 

Section 403 of Public Law 108–173 

amended section 1886(d)(3)(E) of the 

Act to provide that the Secretary must 

employ 62 percent as the labor-related 

share unless this ‘‘would result in lower 

payments to a hospital than would 

otherwise be made.’’ However, this 

provision of Public Law 108–173 did 

not change the legal requirement that 

the Secretary estimate ‘‘from time to 

time’’ the proportion of hospitals’ costs 

that are ‘‘attributable to wages and 

wage-related costs.’’ Thus, hospitals 

receive payment based on either a 62- 

percent labor-related share, or the laborrelated share estimated from time to 

time by the Secretary, depending on 

which labor-related share resulted in a 

higher payment. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50596 through 50607), we 

rebased and revised the hospital market 

basket. We established a FY 2010-based 

IPPS hospital market basket to replace 

the FY 2006-based IPPS hospital market 

basket, effective October 1, 2013. In that 

final rule, we presented our analysis 

and conclusions regarding the frequency 

and methodology for updating the laborrelated share for FY 2014. Using the FY 

2010-based IPPS market basket, we 

finalized a labor-related share for FY 

2014 and for FY 2015 of 69.6 percent. 

In addition, we implemented this 

revised and rebased labor-related share 

in a budget neutral manner. However, 

consistent with section 1886(d)(3)(E) of 

the Act, we did not take into account 

the additional payments that would be 

made as a result of hospitals with a 

wage index less than or equal to 1.0000 

being paid using a labor-related share 

lower than the labor-related share of 

hospitals with a wage index greater than 

1.0000. 

The labor-related share is used to 

determine the proportion of the national 

IPPS base payment rate to which the 

area wage index is applied. In this 

proposed rule, for FY 2016, we are not 

proposing to make any further changes 

to the national average proportion of 

operating costs that are attributable to 

wages and salaries, employee benefits, 

contract labor, the labor-related portion 

of professional fees, administrative and 

facilities support services, and all other 

labor-related services. Therefore, for FY 

2016, we are proposing to continue to 

use a labor-related share of 69.6 percent 

for discharges occurring on or after 

October 1, 2015. 

Tables 1A and 1B, which are 

published in section VI. of the 

Addendum to this proposed rule and 

available via the Internet on the CMS 

Web site, reflect this proposed laborrelated share. For FY 2016, for all IPPS 

hospitals whose wage indexes are less 

than or equal to 1.0000, we are 

proposing to apply the wage index to a 

labor-related share of 62 percent of the 

national standardized amount. For all 

IPPS hospitals whose wage indexes are 

greater than 1.0000, for FY 2016, we are 

proposing to apply the wage index to a 

proposed labor-related share of 69.6 

percent of the national standardized 

amount. We note that, for Puerto Rico 


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hospitals, the national labor-related 

share is 62 percent because the national 

wage index for all Puerto Rico hospitals 

is less than 1.0000. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50601 through 50603), we 

also rebased and revised the laborrelated share for the Puerto Rico-specific 

standardized amounts using FY 2010 as 

a base year. We finalized a labor-related 

share for the Puerto Rico-specific 

standardized amounts for FY 2014 of 

63.2 percent. In the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 49990), for FY 

2015, we did not make any further 

changes to the Puerto Rico specific 

average proportion of operating costs 

that are attributable to wages and 

salaries, employee benefits, contract 

labor, the labor-related portion of 

professional fees, administrative and 

facilities support services, and all other 

labor-related services. For FY 2015, we 

continued to use a labor-related share 

for the Puerto Rico-specific 

standardized amounts of 63.2 percent 

for discharges occurring on or after 

October 1, 2014. 

For FY 2016, we are proposing to 

continue to use a labor-related share for 

the Puerto Rico-specific standardized 

amounts of 63.2 percent for discharges 

occurring on or after October 1, 2015. 

Puerto Rico hospitals are paid based on 

75 percent of the national standardized 

amounts and 25 percent of the Puerto 

Rico-specific standardized amounts. For 

FY 2016, we are proposing that the 

labor-related share of a hospital’s Puerto 

Rico-specific rate would be either the 

Puerto Rico-specific labor-related share 

of 63.2 percent or 62 percent, depending 

on which results in higher payments to 

the hospital. If the hospital has a 

proposed Puerto Rico-specific wage 

index greater than 1.000 for FY 2016, we 

are proposing to set the hospital’s rates 

using a labor-related share of 63.2 

percent for the 25 percent portion of the 

hospital’s payment determined by the 

Puerto Rico standardized amounts 

because this amount would result in 

higher payments. Conversely, a hospital 

with a proposed Puerto Rico-specific 

wage index of less than or equal to 1.000 

for FY 2016 would be paid using the 

Puerto Rico-specific labor-related share 

of 62 percent of the Puerto Rico-specific 

rates because the lower labor-related 

share would result in higher payments. 

The proposed Puerto Rico labor-related 

share of 63.2 percent for FY 2016 is 

reflected in Table 1C, which is 

published in section VI. of the 

Addendum to this proposed rule and 

available via the Internet on the CMS 

Web site. 

N. Proposed Changes to 3-Year Average 

Pension Policy and Proposed Changes to 

the Wage Index Timetable Regarding 

Pension Costs for FY 2017 and 

Subsequent Years 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51586 through 51590), we 

revised our policy for reporting costs of 

qualified defined benefit pension plans 

for the Medicare wage index. Under that 

revised policy, the pension costs that 

are to be included in the wage index 

equal a hospital’s average cash 

contributions deposited to its defined 

benefit pension plan over a 3-year 

period or, if less than a 3-year period, 

the number of years that the hospital 

has sponsored a defined benefit plan. 

The 3-year average is centered on the 

base cost reporting period for the wage 

index. For example, the FY 2016 wage 

index will be based on Medicare cost 

reporting periods beginning during 

Federal FY 2012, and will reflect the 

average pension contributions made in 

a hospital’s cost reporting period that 

began during Federal FYs 2011, 2012, 

and 2013. As stated in the FY 2012 

IPPS/LTCH PPS final rule (76 FR 

51587), we centered the 3-year average 

on the base cost reporting period for the 

wage index in order to ensure that the 

average annual pension cost reflected in 

the wage index is consistent with the 

cost reporting period applicable to all 

other costs included in the index. We 

also stated that we did not anticipate 

that the use of contributions made in the 

period immediately following the base 

cost reporting period (for example, 

using Federal FY 2013 as one of the 3- 

year periods for FY 2016) would create 

an administrative burden because by the 

time the MAC would be reviewing a 

hospital’s base cost reporting period 

wage data for inclusion in the 

subsequent year’s wage index, trust 

account statements and general ledger 

reports to support the contributions 

should be readily available. We refer 

readers to the FY 2012 IPPS/LTCH PPS 

final rule for a complete discussion of 

this policy. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49987 through 49990), we 

finalized changes to the FY 2017 wage 

index timeline. We stated that we 

believed the timeline changes would not 

only improve the accuracy of the 

February public use file (PUF), but also 

would reduce the number of hospital 

appeals based on the February PUF. 

Among these changes to the wage index 

timeline for FY 2017 is a requirement 

that hospitals must request revisions to 

the preliminary PUF by the first week of 

September 2015. In response to our FY 

2015 proposal to change the wage index 

timeline for FY 2017, a public 

commenter stated that the proposed FY 

2017 deadline of early August 2015 did 

not provide enough time for hospitals to 

incorporate their pension data into the 

desk review process because the 

Internal Revenue Service (IRS) Form 

5500 (used as the basis for reporting 

pension contributions for defined 

benefit plans) is due 7 months after the 

end of the plan year (July 31), with 

possible extensions through midSeptember. In response to that 

comment, in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 49989), we 

provided for a general deadline of early 

September to submit revisions to the 

wage index data posted in the May 2015 

preliminary PUF, but provided a limited 

exception for submission of pension 

data for certain hospitals. Specifically, 

starting with the FY 2017 wage index, 

we will allow an extension for a 

hospital with a fiscal year begin date on 

or after August 15 of a year to submit 

its initial pension data by mid-October 

2015, which would revise the 

preliminary PUF. We stated that we 

believed the majority of hospitals, 

which do have fiscal year begin dates 

prior to August 15 of a year, would be 

able to submit their pension data, along 

with the remainder of their wage index 

documentation, to their MACs by the 

beginning of September of each year, in 

time for the beginning of the annual 

wage index desk review process. We 

also stated that, in future rulemaking, 

we may consider revisions to the 3-year 

average pension policy that would allow 

all hospitals to submit their pension 

data at the same time. We refer readers 

to the FY 2015 IPPS/LTCH PPS final 

rule for a complete discussion of the 

changes to the FY 2017 wage index 

timeline (79 FR 49987 through 49990). 

We have now reconsidered the 

changes made to the FY 2017 wage 

index timeline in light of our experience 

to date with the administrative aspects 

of the 3-year average pension policy as 

explained above and in the FY 2012 

IPPS/LTCH PPS final rule (76 FR 51586 

through 51590). Based on our findings, 

we believe that a revision of the 3-year 

average pension policy is warranted, 

beginning with the FY 2017 wage index. 

Specifically, in this FY 2016 proposed 

rule, instead of the 3-year average being 

centered on the base cost reporting 

period for the wage index, we are 

proposing that, for the FY 2017 wage 

index and all subsequent fiscal year 

wage indexes, the 3-year average would 

be based on pension contributions made 

during the base cost reporting period 

plus the prior 2 cost reporting years. For 

example, the FY 2017 wage index will 

be based on Medicare cost reporting 


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periods beginning during Federal FY 

2013. Therefore, the FY 2017 wage 

index would reflect the average pension 

contributions made in hospitals’ cost 

reporting periods beginning during 

Federal FYs 2011, 2012, and 2013 

(rather than Federal FYs 2012, 2013, 

and 2014 under the current FY 2015 

policy). Our proposed change in the 3- 

year averaging period would produce a 

1-year lag in reporting pension costs 

relative to reporting all other costs 

included in the wage index and, for 

most hospitals, would result in the same 

3-year average pension costs for both the 

FY 2016 and FY 2017 wage index. That 

is, for FY 2016, the 3-year average 

consists of Federal FYs 2011, 2012, and 

2013, and under our proposal, the 3- 

year average for FY 2017 also would 

consist of Federal FYs 2011, 2012, and 

2013. Under our proposal, the 3-year 

average for FY 2018 would consist of 

Federal FYs 2012, 2013, and 2014. 

For FY 2017 only, we are proposing 

that all hospitals submit requests to 

revise their previously submitted 

pension data by early October to midOctober (instead of the first week of 

September, as stated in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

49989). We had anticipated proposing 

an early September deadline for all 

hospitals to submit revisions on all data 

in the preliminary PUF, including 

pension data. However, we realized that 

such a deadline would involve requiring 

hospitals to submit all of the revisions 

to pension data prior to the effective 

date of this rule. Therefore, we are 

proposing this deadline change of early 

October to mid-October so that all 

hospitals would submit revisions to 

their pension data by the same deadline, 

which should simplify the deadline for 

submitting those data as well as provide 

more time to most hospitals to submit 

these data. Because the pension data for 

FY 2017 would be the same pension 

data already used in FY 2016 (as 

mentioned above), we would expect 

minimal revisions to the pension data 

for FY 2017. Because we are proposing 

an extension until early to mid-October 

for all hospitals to revise their pension 

data for FY 2017, we are proposing to 

eliminate the limited exception and 

extension for hospitals with a fiscal year 

begin date of on or after August 15, as 

set forth in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 49989). The exception 

is no longer necessary, given the 

proposed use of data from older cost 

reports for the 3-year averaging of 

pension costs and the proposed 

extension of time for submission of 

revisions of pension data for all 

hospitals for FY 2017. For FY 2018 and 

subsequent fiscal years, we are 

proposing to require that all hospitals 

request revisions to the preliminary PUF 

for all wage index issues, including 

submission and/or revisions of pension 

data, by the first week of September. 

The September deadline for FY 2018 

and subsequent fiscal years is consistent 

with the deadline established in the FY 

2015 IPPS/LTCH PPS final rule (7 FR 

49989) for the FY 2017 wage index data. 

Specifically, in that final rule, in 

response to commenters, we established 

the early September deadline as a 

feasible deadline for hospitals to request 

revisions to their preliminary wage and 

occupational mix data. In addition, we 

also stated that a deadline in early 

September would be manageable for 

hospitals, while also providing the 

MACs with the most amount of time 

possible to complete their desk reviews. 

This proposal also allows for a single 

deadline for all hospitals to submit 

revisions to their wage data, including 

their pension costs (as stated above). A 

single deadline is preferable because it 

would result in less confusion and 

would be easier to administer for all 

hospitals. In addition, the limited 

exception for hospitals with a fiscal year 

begin date of on or after August 15 

would have provided administrative 

relief only to a minority of hospitals. 

Furthermore, in many cases, hospitals 

that participate in a systemwide pension 

plan or State-run retirement system 

have been unable to obtain timely 

documentation to support their 

allocated share of total plan 

contributions. We believe that a shift in 

the 3-year average to the base cost 

reporting period plus the prior 2 cost 

reporting years would provide all 

hospitals sufficient time to collect and 

submit their pension data by the 

proposed September deadline, and 

allow MACs to complete their desk 

reviews on schedule, thereby improving 

the accuracy of the February PUF. 

For the reasons outlined above, we are 

proposing to revise the current policy 

used to compute the 3-year average for 

pension costs for the wage index, such 

that, beginning with the FY 2017 wage 

index, the 3-year average would be 

based on pension contributions made 

during the base cost reporting period 

plus the prior 2 cost reporting years. 

The chart below includes the FY 2017 

wage index timetable published in the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 49989), except for the mid-October 

deadline for submitting pension data to 

the MACs for hospitals with fiscal year 

begin dates on or after August 15, which 

we are proposing to eliminate in this 

proposed rule. It also includes our 

proposal for FY 2017 for all hospitals to 

request revisions to their pension data 

by mid-October 2015 (rather than early 

October as published in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

49989)). 

FY 2017 WAGE INDEX TIMETABLE WITH PROPOSED DEADLINE FOR PENSION REVISIONS

Actions Deadlines 

Posting of Preliminary PUF on CMS Web site ............................................................................... Mid-May 2015. 

Deadline for Hospitals to Request Revisions to Preliminary PUF .................................................. First week of September 2015. 

Deadline for Hospitals to Request Revisions to Pension Data ...................................................... Early October 2015 to Mid-October 2015. 

Deadline for MACs to Complete Desk Reviews ............................................................................. Mid-November 2015. 

Posting of January PUF on CMS Web site (formerly ‘‘February’’ PUF) ........................................ Late January 2016. 

Deadline Following Posting of January PUF for Hospitals to Request Revisions ......................... Mid-February 2016. 

Completion of Appeals by MACs and Transmission of Final Wage Data to CMS ........................ Mid to Late March 2016. 

Deadline for Hospitals to Appeal in April ........................................................................................ Early April 2016. 

Posting of Final Rule PUF .............................................................................................................. Late April 2016. 

Deadline for Hospitals to Appeal in May ........................................................................................ Late May 2016. 

Expected Issuance of IPPS Final Rule ........................................................................................... August 1, 2016. 

For FY 2018 and subsequent fiscal 

years, we are proposing the same 

timetable as in FY 2017, except there 

would no longer be a separate deadline 

in October for submitting and/or 

revising pension data. Rather, all 

requests to submit and/or revise pension 

data (as well as any other requests for 

revisions to the preliminary PUF) for FY 


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2018 and subsequent fiscal years would 

be required to be submitted by hospitals 

to MACs in the first week of September 

each year. 

O. Clarification of Allocation of Pension 

Costs for the Wage Index 

As discussed in section III.N. of the 

preamble of this proposed rule, the 

pension cost to be included in the 

Medicare wage index equals a hospital’s 

average cash contributions deposited to 

its defined benefit pension plan over a 

3-year period. Since implementing this 

policy, we have become aware of some 

confusion with respect to how hospitals 

are to compute the 3-year average when 

allocating their pension costs on the 

Medicare cost report if a hospital 

participates in a pension plan or 

retirement system that also covers other 

entities. In this FY 2016 IPPS/LTCH PPS 

proposed rule, we are clarifying that if 

a hospital participates in a pension plan 

or retirement system that also covers 

other entities the hospital must report 

its respective 3-year average pension 

cost (or prefunding balance) reflecting 

only the hospital’s allocated share of 

total plan contributions, and not 

including any share of pension costs of 

other entities. For each hospital, this is 

accomplished by first determining the 

hospital’s allocated portion of pension 

contributions for each year of the 3-year 

average, and then computing the 3-year 

average for that hospital based only on 

that hospital’s respective allocated 

pension contributions. This is 

consistent with the regulations at 42 

CFR 413.24(a), which state, in pertinent 

part, that providers must provide 

adequate cost data based on their 

financial and statistical records. 

Therefore, a provider may not claim as 

an allowable cost the costs of services 

associated with another entity. It is not 

appropriate to compute the 3-year 

average (or prefunding balance) based 

on the total contributions made to the 

plan by all participating entities and 

then determine a hospital’s allocated 

portion of the 3-year average cost (or 

prefunding balance) because there are 

instances in which the 3-year average 

could be skewed because a hospital may 

be including pension costs from another 

entity in its 3-year average. Specifically, 

if the allocated percentage of total plan 

contributions for one or more of the 

participating entities changes during the 

3-year average, the average will be 

skewed. The allocated percentage to 

each entity can change due to mergers, 

changes in plan coverage, or other 

factors. We also note that the allocation 

of contributions between the various 

entities participating in a pension plan 

or pension system should agree with the 

methodology used for plan reporting 

purposes and/or financial statement 

purposes, and the methodology used 

should be applied consistently over 

time. Furthermore, if wage index 

reporting is required for two or more 

hospitals covered under the same 

pension plan or retirement system, 

those hospitals should ensure that the 

allocation of plan contributions for each 

reporting period is determined on a 

consistent basis to avoid duplicate 

reporting of costs. 

IV. Other Decisions and Proposed 

Changes to the IPPS for Operating Costs 

and Indirect Medical Education (IME) 

Costs 

A. Proposed Changes in the Inpatient 

Hospital Update for FY 2016 

(§ 412.64(d)) 

1. Proposed FY 2016 Inpatient Hospital 

Update 

In accordance with section 

1886(b)(3)(B)(i) of the Act, each year we 

update the national standardized 

amount for inpatient operating costs by 

a factor called the ‘‘applicable 

percentage increase.’’ For FY 2016, we 

are setting the applicable percentage 

increase by applying the adjustments 

listed below in the same sequence as we 

did for FY 2015. Specifically, consistent 

with section 1886(b)(3)(B) of the Act, as 

amended by sections 3401(a) and 

10319(a) of the Affordable Care Act, we 

are setting the applicable percentage 

increase by applying the following 

adjustments in the following sequence: 

The applicable percentage increase 

under the IPPS is equal to the rate-ofincrease in the hospital market basket 

for IPPS hospitals in all areas, subject to 

(1) a reduction of one-quarter of the 

applicable percentage increase (prior to 

the application of other statutory 

adjustments; also referred to as the 

market basket update or rate-of-increase 

(with no adjustments)) for hospitals that 

fail to submit quality information under 

rules established by the Secretary in 

accordance with section 

1886(b)(3)(B)(viii) of the Act; (2) a 662⁄3

percent reduction to three-quarters of 

the applicable percentage increase (prior 

to the application of other statutory 

adjustments; also referred to as the 

market basket update or rate-of-increase 

(with no adjustments)) for hospitals not 

considered to be meaningful EHR users 

in accordance with section 

1886(b)(3)(B)(ix) of the Act; (3) an 

adjustment based on changes in 

economy-wide productivity (the 

multifactor productivity (MFP) 

adjustment); and (4) an additional 

reduction of 0.2 percentage point as 

required by section 1886(b)(3)(B)(xii) of 

the Act. Sections 1886(b)(3)(B)(xi) and 

(b)(3)(B)(xii) of the Act, as added by 

section 3401(a) of the Affordable Care 

Act, state that application of the MFP 

adjustment and the additional FY 2016 

adjustment of 0.2 percentage point may 

result in the applicable percentage 

increase being less than zero. 

We note that, in compliance with 

section 404 of the MMA, in the FY 2014 

IPPS/LTCH PPS final rule, we replaced 

the FY 2006-based IPPS operating and 

capital market baskets with the revised 

and rebased FY 2010-based IPPS 

operating and capital market baskets for 

FY 2014. In the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 49993 through 

49996), we continued to use the FY 

2010-based IPPS operating and capital 

market baskets for FY 2015 and the 

labor-related share of 69.6 percent, 

which is based on the FY 2010-based 

IPPS market basket. For FY 2016, we are 

proposing to continue using the FY 

2010-based IPPS operating and capital 

market baskets and the labor-related 

share of 69.6 percent, which is based on 

the FY 2010-based IPPS market basket. 

Based on the most recent data 

available for this FY 2016 proposed 

rule, in accordance with section 

1886(b)(3)(B) of the Act, we are 

proposing to base the proposed FY 2016 

market basket update used to determine 

the applicable percentage increase for 

the IPPS on IHS Global Insight, Inc.’s 

(IGI’s) first quarter 2015 forecast of the 

FY 2010-based IPPS market basket rateof-increase with historical data through 

fourth quarter 2014, which is estimated 

to be 2.7 percent. We are proposing that 

if more recent data become 

subsequently available (for example, a 

more recent estimate of the market 

basket and the MFP adjustment), we 

would use such data, if appropriate, to 

determine the FY 2016 market basket 

update and the MFP adjustment in the 

final rule. 

For FY 2016, depending on whether 

a hospital submits quality data under 

the rules established in accordance with 

section 1886(b)(3)(B)(viii) of the Act 

(hereafter referred to as a hospital that 

submits quality data) and is a 

meaningful EHR user under section 

1886(b)(3)(B)(ix) of the Act (hereafter 

referred to as a hospital that is a 

meaningful EHR user), there are four 

possible applicable percentage increases 

that can be applied to the standardized 

amount (as displayed in the table 

below). 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51689 through 51692), we 

finalized our methodology for 

calculating and applying the MFP 

adjustment. As we explained in that 

rule, section 1886(b)(3)(B)(xi)(II) of the 


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Act, as added by section 3401(a) of the 

Affordable Care Act, defines this 

productivity adjustment as equal to the 

10-year moving average of changes in 

annual economy-wide, private nonfarm 

business MFP (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, calendar 

year, cost reporting period, or other 

annual period). The Bureau of Labor 

Statistics (BLS) publishes the official 

measure of private nonfarm business 

MFP. We refer readers to the BLS Web 

site at http://www.bls.gov/mfp for the 

BLS historical published MFP data. 

MFP is derived by subtracting the 

contribution of labor and capital input 

growth from output growth. The 

projections of the components of MFP 

are currently produced by IGI, a 

nationally recognized economic 

forecasting firm with which CMS 

contracts to forecast the components of 

the market baskets and MFP. As 

described in the FY 2012 IPPS/LTCH 

PPS final rule, in order to generate a 

forecast of MFP, IGI replicated the MFP 

measure calculated by the BLS using a 

series of proxy variables derived from 

IGI’s U.S. macroeconomic models. In 

the FY 2012 IPPS/LTCH PPS final rule, 

we identified each of the major MFP 

component series employed by the BLS 

to measure MFP as well as provided the 

corresponding concepts determined to 

be the best available proxies for the BLS 

series. 

Beginning with the FY 2016 

rulemaking cycle, the MFP adjustment 

is calculated using a revised series 

developed by IGI to proxy the aggregate 

capital inputs. Specifically, IGI has 

replaced the Real Effective Capital Stock 

used for Full Employment GDP with a 

forecast of BLS aggregate capital inputs 

recently developed by IGI using a 

regression model. This series provides a 

better fit to the BLS capital inputs, as 

measured by the differences between 

the actual BLS capital input growth 

rates and the estimated model growth 

rates over the historical time period. 

Therefore, we are using IGI’s most 

recent forecast of the BLS capital inputs 

series in the MFP calculations beginning 

with the FY 2016 rulemaking cycle. A 

complete description of the MFP 

projection methodology is available on 

our Web site at: http://www.cms.gov/

Research-Statistics-Data-and-Systems/

Statistics-Trends-and-Reports/

MedicareProgramRatesStats/

MarketBasketResearch.html. Although 

we discuss the IGI changes to the MFP 

proxy series in this proposed rule, in the 

future, when IGI makes changes to the 

MFP methodology, we will announce 

them on our Web site rather than in the 

annual rulemaking. 

For FY 2016, we are proposing an 

MFP adjustment of 0.6 percentage point. 

Similar to the market basket update, for 

this proposed rule, we are using the 

most recent data available to compute 

the MFP adjustment. As noted above, 

we are proposing that if more recent 

data become subsequently available, we 

would use such data, if appropriate, to 

determine the FY 2016 market basket 

update and MFP adjustment in the FY 

2016 IPPS/LTCH PPS final rule. 

Based on the most recent data 

available for this proposed rule as 

described above, we have determined 

four proposed applicable percentage 

increases to the standardized amount for 

FY 2016, as specified in the table below: 

PROPOSED FY 2016 APPLICABLE PERCENTAGE INCREASES FOR THE IPPS 

FY 2016 

Hospital 

submitted 

quality data 

and is a 

meaningful 

EHR user 

Hospital 

submitted 

quality data 

and is NOT a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is NOT a 

meaningful 

EHR user 

Proposed Market Basket Rate-of-Increase ..................................................... 2.7 2 .7 2 .7 2 .7 

Proposed Adjustment for Failure to Submit Quality Data under Section 

1886(b)(3)(B)(viii) of the Act ........................................................................ 0.0 0 .0 ¥0 .675 ¥0 .675 

Proposed Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ................................................................... 0.0 ¥1 .35 0 .0 ¥1 .35 

Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......... ¥0.6 ¥0 .6 ¥0 .6 ¥0 .6 

Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... ¥0.2 ¥0 .2 ¥0 .2 ¥0 .2 

Proposed Applicable Percentage Increase Applied to Standardized Amount 1.9 0 .55 1 .225 ¥0 .125 

We are proposing to revise the 

existing regulations at 42 CFR 412.64(d) 

to reflect the current law for the FY 

2016 update. Specifically, in accordance 

with section 1886(b)(3)(B) of the Act, we 

are proposing to modify paragraph (vi) 

of § 412.64(d)(1) to include the 

applicable percentage increase to the FY 

2016 operating standardized amount. 

Section 1886(b)(3)(B)(iv) of the Act 

provides that the applicable percentage 

increase to the hospital-specific rates for 

SCHs equals the applicable percentage 

increase set forth in section 

1886(b)(3)(B)(i) of the Act (that is, the 

same update factor as for all other 

hospitals subject to the IPPS). Therefore, 

the update to the hospital-specific rates 

for SCHs also is subject to section 

1886(b)(3)(B)(i) of the Act, as amended 

by sections 3401(a) and 10319(a) of the 

Affordable Care Act. Accordingly, in 

this FY 2016 IPPS/LTCH PPS proposed 

rule, for FY 2016, we are proposing the 

following updates to the hospitalspecific rates applicable to SCHs: A 

proposed update of 1.9 percent for a 

hospital that submits quality data and is 

a meaningful EHR user; a proposed 

update of 1.225 percent for a hospital 

that fails to submit quality data and is 

a meaningful EHR user; a proposed 

update of 0.55 percent for a hospital that 

submits quality data and is not a 

meaningful EHR user; a proposed 

update of ¥0.125 percent for a hospital 

that fails to submit quality data and is 

not a meaningful EHR user. As 

mentioned above, for this FY 2016 

proposed rule, we used IGI’s first 

quarter 2015 forecast of the FY 2010- 

based IPPS market basket update with 

historical data through fourth quarter 

2014. Similarly, we used IGI’s first 

quarter 2015 forecast of the MFP 

adjustment. We are proposing that if 

more recent data become subsequently 

available (for example, a more recent 

estimate of the market basket and the 

MFP adjustment), we would use such 

data, if appropriate, to determine the 

update for SCHs in the final rule. 

We note that the MDH program 

expired for discharges beginning on 

April 1, 2015 under current law. 

2. Proposed FY 2016 Puerto Rico 

Hospital Update 

Puerto Rico hospitals are paid a 

blended rate for their inpatient 

operating costs based on 75 percent of 

the national standardized amount and 

25 percent of the Puerto Rico-specific 


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standardized amount. Section 

1886(d)(9)(C)(i) of the Act is the basis 

for determining the applicable 

percentage increase applied to the 

Puerto Rico-specific standardized 

amount. Section 401(c) of Public Law 

108–173 amended section 

1886(d)(9)(C)(i) of the Act, which states 

that, for discharges occurring in a fiscal 

year (beginning with FY 2004), the 

Secretary shall compute an average 

standardized amount for hospitals 

located in any area of Puerto Rico that 

is equal to the average standardized 

amount computed under subclause (I) 

for fiscal year 2003 for hospitals in a 

large urban area (or, beginning with FY 

2005, for all hospitals in the previous 

fiscal year) increased by the applicable 

percentage increase under subsection 

(b)(3)(B) for the fiscal year involved. 

Therefore, the update to the Puerto 

Rico-specific operating standardized 

amount equals the applicable 

percentage increase set forth in section 

1886(b)(3)(B)(i) of the Act, as amended 

by sections 3401(a) and 10319(a) of the 

Affordable Care Act (that is, the same 

update factor as for all other hospitals 

subject to the IPPS). Accordingly, we are 

proposing an applicable percentage 

increase to the Puerto Rico-specific 

operating standardized amount of 1.9 

percent for FY 2016. For this proposed 

rule, we used the first quarter 2015 

forecast of the FY 2010-based IPPS 

market basket update with historical 

data through fourth quarter 2014. We 

are proposing that if more recent data 

become subsequently available, we 

would use such data, if appropriate, to 

determine the final FY 2016 applicable 

percentage increase for the final rule. 

We note that the provisions of section 

1886(b)(3)(B)(viii) of the Act, which 

specify the adjustments to the 

applicable percentage increase for 

‘‘subsection (d)’’ hospitals that do not 

submit quality data under the rules 

established by the Secretary, and the 

provisions of section 1886(b)(3)(B)(ix) of 

the Act, which specify the adjustments 

to the applicable percentage increase for 

‘‘subsection (d)’’ hospitals that are not 

meaningful EHR users, are not 

applicable to hospitals located in Puerto 

Rico. 

Similarly, for this FY 2016 proposed 

rule, we used IGI’s first quarter 2015 

forecast of the MFP adjustment. We are 

proposing that if more recent data 

become subsequently available, we 

would use such data, if appropriate, to 

determine the MFP adjustment for the 

final rule. 

B. Rural Referral Centers (RRCs): 

Proposed Annual Updates to Case-Mix 

Index and Discharge Criteria (§ 412.96) 

Under the authority of section 

1886(d)(5)(C)(i) of the Act, the 

regulations at § 412.96 set forth the 

criteria that a hospital must meet in 

order to qualify under the IPPS as a 

rural referral center (RRC). RRCs receive 

some special treatment under both the 

DSH payment adjustment and the 

criteria for geographic reclassification. 

Section 402 of Public Law 108–173 

raised the DSH payment adjustment for 

RRCs such that they are not subject to 

the 12-percent cap on DSH payments 

that is applicable to other rural 

hospitals. RRCs also are not subject to 

the proximity criteria when applying for 

geographic reclassification. In addition, 

they do not have to meet the 

requirement that a hospital’s average 

hourly wage must exceed, by a certain 

percentage, the average hourly wage of 

the labor market area in which the 

hospital is located. 

Section 4202(b) of Public Law 105–33 

states, in part, that any hospital 

classified as an RRC by the Secretary for 

FY 1991 shall be classified as such an 

RRC for FY 1998 and each subsequent 

fiscal year. In the August 29, 1997 IPPS 

final rule with comment period (62 FR 

45999), CMS reinstated RRC status for 

all hospitals that lost that status due to 

triennial review or MGCRB 

reclassification. However, CMS did not 

reinstate the status of hospitals that lost 

RRC status because they were now 

urban for all purposes because of the 

OMB designation of their geographic 

area as urban. Subsequently, in the 

August 1, 2000 IPPS final rule (65 FR 

47089), we indicated that we were 

revisiting that decision. Specifically, we 

stated that we would permit hospitals 

that previously qualified as an RRC and 

lost their status due to OMB 

redesignation of the county in which 

they are located from rural to urban, to 

be reinstated as an RRC. Otherwise, a 

hospital seeking RRC status must satisfy 

all of the other applicable criteria. We 

use the definitions of ‘‘urban’’ and 

‘‘rural’’ specified in Subpart D of 42 CFR 

Part 412. One of the criteria under 

which a hospital may qualify as an RRC 

is to have 275 or more beds available for 

use (§ 412.96(b)(1)(ii)). A rural hospital 

that does not meet the bed size 

requirement can qualify as an RRC if the 

hospital meets two mandatory 

prerequisites (a minimum case-mix 

index (CMI) and a minimum number of 

discharges), and at least one of three 

optional criteria (relating to specialty 

composition of medical staff, source of 

inpatients, or referral volume). (We refer 

readers to § 412.96(c)(1) through (c)(5) 

and the September 30, 1988 Federal 

Register (53 FR 38513) for additional 

discussion.) With respect to the two 

mandatory prerequisites, a hospital may 

be classified as an RRC if— 

• The hospital’s CMI is at least equal 

to the lower of the median CMI for 

urban hospitals in its census region, 

excluding hospitals with approved 

teaching programs, or the median CMI 

for all urban hospitals nationally; and 

• The hospital’s number of discharges 

is at least 5,000 per year, or, if fewer, the 

median number of discharges for urban 

hospitals in the census region in which 

the hospital is located. The number of 

discharges criterion for an osteopathic 

hospital is at least 3,000 discharges per 

year, as specified in section 

1886(d)(5)(C)(i) of the Act. 

1. Case-Mix Index (CMI) 

Section 412.96(c)(1) provides that 

CMS establish updated national and 

regional CMI values in each year’s 

annual notice of prospective payment 

rates for purposes of determining RRC 

status. The methodology we used to 

determine the national and regional CMI 

values is set forth in the regulations at 

§ 412.96(c)(1)(ii). The proposed national 

median CMI value for FY 2016 is based 

on the CMI values of all urban hospitals 

nationwide, and the proposed regional 

median CMI values for FY 2016 are 

based on the CMI values of all urban 

hospitals within each census region, 

excluding those hospitals with 

approved teaching programs (that is, 

those hospitals that train residents in an 

approved GME program as provided in 

§ 413.75). These proposed values are 

based on discharges occurring during 

FY 2014 (October 1, 2013 through 

September 30, 2014), and include bills 

posted to CMS’ records through 

December 2014. 

We are proposing that, in addition to 

meeting other criteria, if rural hospitals 

with fewer than 275 beds are to qualify 

for initial RRC status for cost reporting 

periods beginning on or after October 1, 

2015, they must have a CMI value for 

FY 2014 that is at least— 

• 1.6075; or 

• The median CMI value (not 

transfer-adjusted) for urban hospitals 

(excluding hospitals with approved 

teaching programs as identified in 

§ 413.75) calculated by CMS for the 

census region in which the hospital is 

located. The proposed median CMI 

values by region are set forth in the 

following table. 


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Region 

Proposed 

case-mix index 

value 

1. New England (CT, ME, 

MA, NH, RI, VT) ................ 1.3737 

2. Middle Atlantic (PA, NJ, 

NY) .................................... 1.4532 

3. South Atlantic (DE, DC, 

FL, GA, MD, NC, SC, VA, 

WV) ................................... 1.5042 

4. East North Central (IL, IN, 

MI, OH, WI) ....................... 1.5109 

5. East South Central (AL, 

KY, MS, TN) ...................... 1.4172 

6. West North Central (IA, 

KS, MN, MO, NE, ND, SD) 1.5890 

7. West South Central (AR, 

LA, OK, TX) ...................... 1.6294 

8. Mountain (AZ, CO, ID, 

MT, NV, NM, UT, WY) ...... 1.7048 

9. Pacific (AK, CA, HI, OR, 

WA) ................................... 1.6157 

We intend to update the preceding 

CMI values in the FY 2016 final rule to 

reflect the updated FY 2014 MedPAR 

file, which would contain data from 

additional bills received through March 

2015. 

A hospital seeking to qualify as an 

RRC should obtain its hospital-specific 

CMI value (not transfer-adjusted) from 

its MAC. Data are available on the 

Provider Statistical and Reimbursement 

(PS&R) System. In keeping with our 

policy on discharges, the CMI values are 

computed based on all Medicare patient 

discharges subject to the IPPS MS– 

DRG–based payment. 

2. Discharges 

Section 412.96(c)(2)(i) provides that 

CMS set forth the national and regional 

numbers of discharges criteria in each 

year’s annual notice of prospective 

payment rates for purposes of 

determining RRC status. As specified in 

section 1886(d)(5)(C)(ii) of the Act, the 

national standard is set at 5,000 

discharges. For FY 2016, we are 

proposing to update the regional 

standards based on discharges for urban 

hospitals’ cost reporting periods that 

began during FY 2013 (that is October 

1, 2012 through September 30, 2013), 

which are the latest cost report data 

available at the time this proposed rule 

was developed. 

We are proposing that, in addition to 

meeting other criteria, a hospital, if it is 

to qualify for initial RRC status for cost 

reporting periods beginning on or after 

October 1, 2015, must have, as the 

number of discharges for its cost 

reporting period that began during FY 

2013, at least— 

• 5,000 (3,000 for an osteopathic 

hospital); or 

• The median number of discharges 

for urban hospitals in the census region 

in which the hospital is located, as 

indicated in the following table. 

Region Number of 

discharges 

1. New England (CT, ME, 

MA, NH, RI, VT) ................ 7,370 

2. Middle Atlantic (PA, NJ, 

NY) .................................... 10,398 

3. South Atlantic (DE, DC, 

FL, GA, MD, NC, SC, VA, 

WV) ................................... 10,220 

4. East North Central (IL, IN, 

MI, OH, WI) ....................... 7,951 

5. East South Central (AL, 

KY, MS, TN) ...................... 7,439 

6. West North Central (IA, 

KS, MN, MO, NE, ND, SD) 7,858 

7. West South Central (AR, 

LA, OK, TX) ...................... 5,355 

8. Mountain (AZ, CO, ID, 

MT, NV, NM, UT, WY) ...... 8,480 

9. Pacific (AK, CA, HI, OR, 

WA) ................................... 8,588 

We intend to update these numbers in 

the FY 2016 final rule based on the 

latest available cost report data. 

We note that the median number of 

discharges for hospitals in each census 

region is greater than the national 

standard of 5,000 discharges. Therefore, 

under this proposed rule, 5,000 

discharges is the minimum criterion for 

all hospitals, except for osteopathic 

hospitals for which the minimum 

criterion is 3,000 discharges. 

C. Indirect Medical Education (IME) 

Payment Adjustment Factor for FY 2016 

(§ 412.105) 

Under the IPPS, an additional 

payment amount is made to hospitals 

with residents in an approved graduate 

medical education (GME) program in 

order to reflect the higher indirect 

patient care costs of teaching hospitals 

relative to nonteaching hospitals. The 

payment amount is determined by use 

of a statutorily specified adjustment 

factor. The regulations regarding the 

calculation of this additional payment, 

known as the IME adjustment, are 

located at § 412.105. We refer readers to 

the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51680) for a full discussion of the 

IME adjustment and IME adjustment 

factor. Section 1886(d)(5)(B) of the Act 

states that, for discharges occurring 

during FY 2008 and fiscal years 

thereafter, the IME formula multiplier is 

1.35. Accordingly, for discharges 

occurring during FY 2016, the formula 

multiplier is 1.35. We estimate that 

application of this formula multiplier 

for the FY 2016 IME adjustment will 

result in an increase in IPPS payment of 

5.5 percent for every approximately 10 

percent increase in the hospital’s 

resident to bed ratio. 

D. Proposed FY 2016 Payment 

Adjustment for Medicare 

Disproportionate Share Hospitals 

(DSHs) (§ 412.106) 

1. Background 

Section 1886(d)(5)(F) of the Act 

provides for additional Medicare 

payments to subsection (d) hospitals 

that serve a significantly 

disproportionate number of low-income 

patients. The Act specifies two methods 

by which a hospital may qualify for the 

Medicare disproportionate share 

hospital (DSH) adjustment. Under the 

first method, hospitals that are located 

in an urban area and have 100 or more 

beds may receive a Medicare DSH 

payment adjustment if the hospital can 

demonstrate that, during its cost 

reporting period, more than 30 percent 

of its net inpatient care revenues are 

derived from State and local 

government payments for care furnished 

to needy patients with low incomes. 

This method is commonly referred to as 

the ‘‘Pickle method.’’ The second 

method for qualifying for the DSH 

payment adjustment, which is the most 

common, is based on a complex 

statutory formula under which the DSH 

payment adjustment is based on the 

hospital’s geographic designation, the 

number of beds in the hospital, and the 

level of the hospital’s disproportionate 

patient percentage (DPP). A hospital’s 

DPP is the sum of two fractions: The 

‘‘Medicare fraction’’ and the ‘‘Medicaid 

fraction.’’ The Medicare fraction (also 

known as the ‘‘SSI fraction’’ or ‘‘SSI 

ratio’’) is computed by dividing the 

number of the hospital’s inpatient days 

that are furnished to patients who were 

entitled to both Medicare Part A and 

Supplemental Security Income (SSI) 

benefits by the hospital’s total number 

of patient days furnished to patients 

entitled to benefits under Medicare Part 

A. The Medicaid fraction is computed 

by dividing the hospital’s number of 

inpatient days furnished to patients 

who, for such days, were eligible for 

Medicaid, but were not entitled to 

benefits under Medicare Part A, by the 

hospital’s total number of inpatient days 

in the same period. 

Because the DSH payment adjustment 

is part of the IPPS, the DSH statutory 

references (under section 1886(d)(5)(F) 

of the Act) to ‘‘days’’ apply only to 

hospital acute care inpatient days. 

Regulations located at § 412.106 govern 

the Medicare DSH payment adjustment 

and specify how the DPP is calculated 

as well as how beds and patient days are 

counted in determining the Medicare 

DSH payment adjustment. Under 

§ 412.106(a)(1)(i), the number of beds for 

the Medicare DSH payment adjustment 


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is determined in accordance with bed 

counting rules for the IME adjustment 

under § 412.105(b). 

2. Impact on Medicare DSH Payment 

Adjustment of the Continued 

Implementation of New OMB Labor 

Market Area Delineations 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 49951), we implemented the 

revised OMB labor market area 

delineations (which are based on 2010 

Decennial Census data) for the FY 2015 

wage index. (In this proposed rule, we 

refer to these revised OMB labor market 

area delineations as the ‘‘new OMB 

delineations.’’) We stated that this 

implementation would have an impact 

on the calculation of Medicare DSH 

payments to certain hospitals. Hospitals 

that are designated as rural with less 

than 500 beds and that are not rural 

referral centers (RRCs) are subject to a 

maximum DSH payment adjustment of 

12 percent. Accordingly, hospitals with 

less than 500 beds that are currently in 

urban counties that became rural when 

we adopted the new OMB delineations, 

and that did not become RRCs, are 

subject to a maximum DSH payment 

adjustment of 12 percent. (We note that 

urban hospitals are only subject to a 

maximum DSH payment adjustment of 

12 percent if they have less than 100 

beds.) 

Under the regulation at 42 CFR 

412.102, a hospital located in an area 

that is reclassified from urban to rural, 

as defined in the regulations, may 

receive an adjustment to its rural 

Federal payment amount for operating 

costs for 2 successive fiscal years. 

Specifically, the regulations state that, 

in the first year after a hospital loses 

urban status, the hospital will receive an 

additional payment that equals twothirds of the difference between the 

DSH payments as applicable to the 

hospital before its redesignation from 

urban to rural and the DSH payments 

applicable to the hospital subsequent to 

its redesignation from urban to rural. In 

the second year after a hospital loses 

urban status, the hospital will receive an 

additional payment that equals onethird of the difference between the DSH 

payments applicable to the hospital 

before its redesignation from urban to 

rural and the DSH payments otherwise 

applicable to the hospital subsequent to 

its redesignation from urban to rural. 

We note that we no longer make a 

distinction between the urban 

standardized amount and the rural 

standardized amount. Rather, hospitals 

receive the same standardized amount, 

regardless of their geographic 

designation. Accordingly, in the FY 

2015 IPPS/LTCH PPS final rule, we 

revised the regulation at § 412.102 to 

remove references to the urban and rural 

standardized amounts. 

The provisions of § 412.102 continue 

to apply with respect to the calculation 

of the DSH payments to hospitals that 

are currently located in urban counties 

that became rural under our adoption of 

the new OMB delineations. Specifically, 

the regulations state that, in the first 

year after a hospital loses urban status, 

the hospital will receive an additional 

payment that equals two-thirds of the 

difference between the DSH payments 

as applicable to the hospital before its 

redesignation from urban to rural and 

the DSH payments otherwise applicable 

to the hospital subsequent to its 

redesignation from urban to rural. In the 

second year after a hospital loses urban 

status, the hospital will receive an 

additional payment that equals onethird of the difference between the DSH 

payments applicable to the hospital 

before its redesignation from urban to 

rural and the DSH payments otherwise 

applicable to the hospital subsequent to 

its redesignation from urban to rural. 

For the purposes of ratesetting, 

calculating budget neutrality, and 

modeling payment impacts for this FY 

2016 proposed rule, any hospital that 

was previously urban but changed to 

rural status in FY 2015 as a result of the 

adoption of the new OMB labor market 

area delineations will have its DSH 

payments modeled such that the 

payment equals the amount of the rural 

DSH payments plus one-third of the 

difference between the urban DSH 

payments and the rural DSH payments. 

3. Payment Adjustment Methodology for 

Medicare Disproportionate Share 

Hospitals (DSHs) Under Section 3133 of 

the Affordable Care Act 

a. General Discussion 

Section 3133 of the Patient Protection 

and Affordable Care Act, as amended by 

section 10316 of the same act and 

section 1104 of the Health Care and 

Education Reconciliation Act (Pub. L. 

111–152), added a new section 1886(r) 

to the Act that modifies the 

methodology for computing the 

Medicare DSH payment adjustment 

beginning in FY 2014. For purposes of 

this proposed rule, we refer to these 

provisions collectively as section 3133 

of the Affordable Care Act. 

Medicare DSH payments are 

calculated under a statutory formula 

that considers the hospital’s Medicare 

utilization attributable to beneficiaries 

who also receive Supplemental Security 

Income (SSI) benefits and the hospital’s 

Medicaid utilization. Beginning with 

discharges in FY 2014, hospitals that 

qualify for Medicare DSH payments 

under section 1886(d)(5)(F) of the Act 

receive 25 percent of the amount they 

previously would have received under 

the statutory formula for Medicare DSH 

payments. This provision applies 

equally to hospitals that qualify for DSH 

payments under section 

1886(d)(5)(F)(i)(I) of the Act and those 

hospitals that qualify under the Pickle 

method under section 1886(d)(5)(F)(i)(II) 

of the Act. 

The remaining amount, equal to an 

estimate of 75 percent of what otherwise 

would have been paid as Medicare DSH 

payments, reduced to reflect changes in 

the percentage of individuals under age 

65 who are uninsured, is available to 

make additional payments to each 

hospital that qualifies for Medicare DSH 

payments and that has uncompensated 

care. The payments to each hospital for 

a fiscal year are based on the hospital’s 

amount of uncompensated care for a 

given time period relative to the total 

amount of uncompensated care for that 

same time period reported by all 

hospitals that receive Medicare DSH 

payments for that fiscal year. 

As provided by section 3133 of the 

Affordable Care Act, section 1886(r) of 

the Act requires that, for FY 2014 and 

each subsequent fiscal year, a 

subsection (d) hospital that would 

otherwise receive a disproportionate 

share hospital payment made under 

section 1886(d)(5)(F) of the Act receives 

two separately calculated payments. 

Specifically, section 1886(r)(1) of the 

Act provides that the Secretary shall pay 

to such a subsection (d) hospital 

(including a Pickle hospital) 25 percent 

of the amount the hospital would have 

received under section 1886(d)(5)(F) of 

the Act for DSH payments, which 

represents the empirically justified 

amount for such payment, as 

determined by the Medicare Payment 

Advisory Commission in its March 2007 

Report to the Congress. We refer to this 

payment as the ‘‘empirically justified 

Medicare DSH payment.’’ 

In addition to this empirically 

justified Medicare DSH payment, 

section 1886(r)(2) of the Act provides 

that, for FY 2014 and each subsequent 

fiscal year, the Secretary shall pay to 

such subsection (d) hospital an 

additional amount equal to the product 

of three factors. The first factor is the 

difference between the aggregate 

amount of payments that would be 

made to subsection (d) hospitals under 

section 1886(d)(5)(F) of the Act if 

subsection (r) did not apply and the 

aggregate amount of payments that are 

made to subsection (d) hospitals under 

section 1886(r)(1) of the Act for each 

fiscal year. Therefore, this factor 


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amounts to 75 percent of the payments 

that would otherwise be made under 

section 1886(d)(5)(F) of the Act. 

The second factor is, for FYs 2014 

through 2017, 1 minus the percent 

change in the percent of individuals 

under the age of 65 who are uninsured, 

determined by comparing the percent of 

such individuals who are uninsured in 

2013, the last year before coverage 

expansion under the Affordable Care 

Act (as calculated by the Secretary 

based on the most recent estimates 

available from the Director of the 

Congressional Budget Office before a 

vote in either House on the Health Care 

and Education Reconciliation Act of 

2010 that, if determined in the 

affirmative, would clear such Act for 

enrollment), minus 0.1 percentage point 

for FY 2014, and minus 0.2 percentage 

point for FYs 2015 through 2017. For 

FYs 2014 through 2017, the baseline for 

the estimate of the change in 

uninsurance is fixed by the most recent 

estimate of the Congressional Budget 

Office before the final vote on the 

Health Care and Education 

Reconciliation Act of 2010, which is 

contained in a March 20, 2010 letter 

from the Director of the Congressional 

Budget Office to the Speaker of the 

House. (The March 20, 2010 letter is 

available for viewing on the following 

Web site: http://www.cbo.gov/sites/

default/files/cbofiles/ftpdocs/113xx/

doc11379/amendreconprop.pdf.). 

For FY 2018 and subsequent years, 

the second factor is 1 minus the percent 

change in the percent of individuals 

who are uninsured, as determined by 

comparing the percent of individuals 

who are uninsured in 2013 (as estimated 

by the Secretary, based on data from the 

Census Bureau or other sources the 

Secretary determines appropriate, and 

certified by the Chief Actuary of CMS, 

and the percent of individuals who are 

uninsured in the most recent period for 

which data are available (as so 

estimated and certified), minus 0.2 

percentage point for FYs 2018 and 2019. 

Therefore, for FY 2018 and subsequent 

years, the statute provides some greater 

flexibility in the choice of the data 

sources to be used for the estimate of the 

change in the percent of uninsured 

individuals. 

The third factor is a percent that, for 

each subsection (d) hospital, represents 

the quotient of the amount of 

uncompensated care for such hospital 

for a period selected by the Secretary (as 

estimated by the Secretary, based on 

appropriate data), including the use of 

alternative data where the Secretary 

determines that alternative data is 

available which is a better proxy for the 

costs of subsection (d) hospitals for 

treating the uninsured, and the 

aggregate amount of uncompensated 

care for all subsection (d) hospitals that 

receive a payment under section 1886(r) 

of the Act. Therefore, this third factor 

represents a hospital’s uncompensated 

care amount for a given time period 

relative to the uncompensated care 

amount for that same time period for all 

hospitals that receive Medicare DSH 

payments in that fiscal year, expressed 

as a percent. 

For each hospital, the product of these 

three factors represents its additional 

payment for uncompensated care for the 

applicable fiscal year. We refer to the 

additional payment determined by these 

factors as the ‘‘uncompensated care 

payment.’’ 

Section 1886(r) of the Act applies to 

FY 2014 and each subsequent fiscal 

year. In the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50620 through 50647) 

and the FY 2014 IPPS interim final rule 

with comment period (78 FR 61191 

through 61197), we set forth our policies 

for implementing the required changes 

to the DSH payment methodology made 

by section 3133 of the Affordable Care 

Act for FY 2014. In those rules, we 

noted that, because section 1886(r) of 

the Act modifies the payment required 

under section 1886(d)(5)(F) of the Act, 

it affects only the DSH payment under 

the operating IPPS. It does not revise or 

replace the capital IPPS DSH payment 

provided under the regulations at 42 

CFR part 412, subpart M, which were 

established through the exercise of the 

Secretary’s discretion in implementing 

the capital IPPS under section 

1886(g)(1)(A) of the Act. 

Finally, section 1886(r)(3) of the Act 

provides that there shall be no 

administrative or judicial review under 

section 1869, section 1878, or otherwise 

of any estimate of the Secretary for 

purposes of determining the factors 

described in section 1886(r)(2) of the 

Act or of any period selected by the 

Secretary for the purpose of determining 

those factors. Therefore, there is no 

administrative or judicial review of the 

estimates developed for purposes of 

applying the three factors used to 

determine uncompensated care 

payments, or the periods selected in 

order to develop such estimates. 

b. Eligibility for Empirically Justified 

Medicare DSH Payments and 

Uncompensated Care Payments 

As indicated earlier, the payment 

methodology under section 3133 of the 

Affordable Care Act applies to 

‘‘subsection (d) hospitals’’ that would 

otherwise receive a DSH payment made 

under section 1886(d)(5)(F) of the Act. 

Therefore, hospitals must receive 

empirically justified Medicare DSH 

payments in a fiscal year in order to 

receive an additional Medicare 

uncompensated care payment for that 

year. Specifically, section 1886(r)(2) of 

the Act states that in addition to the 

payment made to a subsection (d) 

hospital under section 1886(r)(1) of the 

Act, the Secretary shall pay to such 

subsection (d) hospitals an additional 

amount. Because section 1886(r)(1) of 

the Act refers to empirically justified 

Medicare DSH payments, the additional 

payment under section 1886(r)(2) of the 

Act is limited to hospitals that receive 

empirically justified Medicare DSH 

payments in accordance with section 

1886(r)(1) of the Act for the applicable 

fiscal year. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50622) and the FY 2014 

IPPS interim final rule with comment 

period (78 FR 61193), we provided that 

hospitals that are not eligible to receive 

empirically justified Medicare DSH 

payments in a fiscal year will not 

receive uncompensated care payments 

for that year. We also specified that we 

would make a determination concerning 

eligibility for interim uncompensated 

care payments based on each hospital’s 

estimated DSH status for the applicable 

fiscal year (using the most recent data 

that are available). We indicated that 

our final determination on the hospital’s 

eligibility for uncompensated care 

payments would be based on the 

hospital’s actual DSH status on the cost 

report for that payment year. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50622) and the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

50006), we specified our policies for 

several specific classes of hospitals 

within the scope of section 1886(r) of 

the Act. We refer readers to those two 

final rules for a detailed discussion of 

our policies. In summary, we specified 

the following: 

• Subsection (d) Puerto Rico hospitals 

that are eligible for DSH payments also 

are eligible to receive empirically 

justified Medicare DSH payments and 

uncompensated care payments under 

the new payment methodology (78 FR 

50623 and 79 FR 50006). 

• Maryland hospitals are not eligible 

to receive empirically justified Medicare 

DSH payments and uncompensated care 

payments under the payment 

methodology of section 1886(r) of the 

Act because they are not paid under the 

IPPS. As discussed in the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50007), 

effective January 1, 2014, the State of 

Maryland elected to no longer have 

Medicare pay Maryland hospitals in 

accordance with section 1814(b)(3) of 

the Act and entered into an agreement 


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with CMS that Maryland hospitals will 

be paid under the Maryland All-Payer 

Model. However, under the Maryland 

All-Payer Model, Maryland hospitals 

still are not paid under the IPPS. 

Therefore, they remain ineligible to 

receive empirically justified Medicare 

DSH payments or uncompensated care 

payments under section 1886(r) of the 

Act. 

• SCHs that are paid under their 

hospital-specified rate are not eligible 

for Medicare DSH payments. SCHs that 

are paid under the IPPS Federal rate 

receive interim payments based on what 

we estimate and project their DSH status 

to be prior to the beginning of the 

Federal fiscal year (based on the best 

available data at that time) subject to 

settlement through the cost report, and 

if they receive interim empirically 

justified Medicare DSH payments in a 

fiscal year, they also will receive interim 

uncompensated care payments for that 

fiscal year on a per discharge basis, 

subject as well to settlement through the 

cost report. Final eligibility 

determinations will be made at the end 

of the cost reporting period at 

settlement, and both interim empirically 

justified Medicare DSH payments and 

uncompensated care payments will be 

adjusted accordingly (78 FR 50624 and 

79 FR 50007). 

• MDHs, up until the expiration of 

the MDH program on March 31, 2015, 

were paid under the IPPS Federal rate 

or, if higher, the IPPS Federal rate plus 

75 percent of the amount by which the 

Federal rate is exceeded by the updated 

hospital-specific rate from certain 

specified base years (76 FR 51684). The 

IPPS Federal rate used in the MDH 

payment methodology is the same IPPS 

Federal rate that is used in the SCH 

payment methodology. Therefore, 

MDHs were eligible to receive Medicare 

DSH payments and uncompensated care 

payments if their disproportionate 

patient percentage was at least 15 

percent. We applied the same process to 

determine MDH eligibility for Medicare 

DSH and uncompensated care 

payments, as we did for all other IPPS 

hospitals, through March 31, 2015 (79 

FR 50007). Consistent with our policy of 

including a pro rata share of the 

uncompensated care payment amount 

for a period as part of the Federal rate 

payment in the comparison of payments 

under the hospital-specific rate and the 

Federal rate, for MDH payments for the 

first 6 months of FY 2015, we will 

include a pro rata share of the 

uncompensated care payment amount 

that reflects the period of time the 

hospital was paid under the MDH 

program for its discharges occurring on 

or after October 1, 2014, and before 

April 1, 2015 (79 FR 50008). Beginning 

April 1, 2015, all hospitals that 

previously qualified for MDH status no 

longer have MDH status under current 

law. Therefore, starting April 1, 2015, 

we determine eligibility for these 

hospitals as we do for all other IPPS 

hospitals. 

If the MDH program were to be 

extended beyond its current expiration 

date of March 31, 2015, similar to how 

it was extended from October 1, 2013, 

to March 31, 2014, under the Pathway 

for SGR Reform Act (Pub. L. 113–67) 

and from April 1, 2014, to March 31, 

2015, by the Protecting Access to 

Medicare Act of 2014 (Pub. L. 113–93), 

MDHs would continue to be paid based 

on the IPPS Federal rate or, if higher, 

the IPPS Federal rate plus 75 percent of 

the amount by which the Federal rate is 

exceeded by the updated hospitalspecific rate from certain specified base 

years (76 FR 51684). Because MDHs are 

paid based on the IPPS Federal rate and, 

therefore, are eligible to receive 

Medicare DSH payments if their 

disproportionate patient percentage is at 

least 15 percent, if the MDH program is 

extended beyond its current expiration 

date of March 31, 2015, we would 

continue to make a determination 

concerning eligibility for interim 

uncompensated care payments based on 

each hospital’s estimated DSH status for 

the applicable fiscal year (using the 

most recent data that are available). Our 

final determination on the hospital’s 

eligibility for uncompensated care 

payments would be based on the 

hospital’s actual DSH status on the cost 

report for that payment year. In 

addition, as we do for all IPPS hospitals, 

we would calculate a numerator for 

Factor 3 for all MDHs, regardless of 

whether they are projected to be eligible 

for Medicare DSH payments during the 

fiscal year, but the denominator for 

Factor 3 would be based on the 

uncompensated care data from the 

hospitals that we have projected to be 

eligible for Medicare DSH payments 

during the fiscal year. 

These policies for MDHs would only 

apply in FY 2016 if the MDH program 

is extended, by statute, beyond its 

current expiration date of March 31, 

2015. 

• IPPS hospitals that have elected to 

participate in the Bundled Payments for 

Care Improvement initiative continue to 

be paid under the IPPS (77 FR 53342) 

and, therefore, are eligible to receive 

empirically justified Medicare DSH 

payments and uncompensated care 

payments (78 FR 50625 and 79 FR 

50008). 

• Hospitals participating in the Rural 

Community Hospital Demonstration 

Program under section 410A of the 

Medicare Modernization Act do not 

receive DSH payments and, therefore, 

are excluded from receiving empirically 

justified Medicare DSH payments and 

uncompensated care payments under 

the new DSH payment methodology (78 

FR 50625 and 79 FR 50008). There are 

20 hospitals currently participating in 

the demonstration. 

c. Empirically Justified Medicare DSH 

Payments 

As we have discussed earlier, section 

1886(r)(1) of the Act requires the 

Secretary to pay 25 percent of the 

amount of the DSH payment that would 

otherwise be made under section 

1886(d)(5)(F) of the Act to a subsection 

(d) hospital. Because section 1886(r)(1) 

of the Act merely requires the program 

to pay a designated percentage of these 

payments, without revising the criteria 

governing eligibility for DSH payments 

or the underlying payment 

methodology, we stated in the FY 2014 

IPPS/LTCH PPS final rule that we did 

not believe that it was necessary to 

develop any new operational 

mechanisms for making such payments. 

Therefore, in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50626), we 

implemented this provision simply by 

revising the claims payment 

methodologies to adjust the interim 

claim payments to the requisite 25 

percent of what would have otherwise 

been paid. We also made corresponding 

changes to the hospital cost report so 

that these empirically justified Medicare 

DSH payments can be settled at the 

appropriate level at the time of cost 

report settlement. We provided more 

detailed operational instructions and 

cost report instructions following 

issuance of the final rule that can be 

found on the CMS Web site at: http:// 

www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/2014- 

Transmittals-Items/R5P240.html. 

d. Uncompensated Care Payments 

As we have discussed earlier, section 

1886(r)(2) of the Act provides that, for 

each eligible hospital in FY 2014 and 

subsequent years, the uncompensated 

care payment is the product of three 

factors. These three factors represent our 

estimate of 75 percent of the amount of 

Medicare DSH payments that would 

otherwise have been paid, an 

adjustment to this amount for the 

percent change in the national rate of 

uninsurance compared to the rate of 

uninsurance in 2013, and each eligible 

hospital’s estimated uncompensated 

care amount relative to the estimated 

uncompensated care amount for all 

eligible hospitals. Below we discuss the 


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data sources and methodologies for 

computing each of these factors, our 

final policies for FY 2014 and FY 2015, 

and our proposed policies for FY 2016. 

(1) Calculation of Proposed Factor 1 for 

FY 2016 

Section 1886(r)(2)(A) of the Act 

establishes Factor 1 in the calculation of 

the uncompensated care payment. 

Section 1886(r)(2)(A) of the Act states 

that it is a factor equal to the difference 

between (i) the aggregate amount of 

payments that would be made to 

subsection (d) hospitals under section 

1886(d)(5)(F) if this section did not 

apply for such fiscal year (as estimated 

by the Secretary); and (ii) the aggregate 

amount of payments that are made to 

subsection (d) hospitals under section 

1886(r)(1) of the Act for such fiscal year 

(as so estimated). Therefore, section 

1886(r)(2)(A)(i) of the Act represents the 

estimated Medicare DSH payment that 

would have been made under section 

1886(d)(5)(F) of the Act if section 

1886(r) of the Act did not apply for such 

fiscal year. Under a prospective 

payment system, we would not know 

the precise aggregate Medicare DSH 

payment amount that would be paid for 

a Federal fiscal year until cost report 

settlement for all IPPS hospitals is 

completed, which occurs several years 

after the end of the Federal fiscal year. 

Therefore, section 1886(r)(2)(A)(i) of the 

Act provides authority to estimate this 

amount, by specifying that, for each 

fiscal year to which the provision 

applies, such amount is to be ‘‘estimated 

by the Secretary.’’ Similarly, section 

1886(r)(2)(A)(ii) of the Act represents 

the estimated empirically justified 

Medicare DSH payments to be made in 

a fiscal year, as prescribed under section 

1886(r)(1) of the Act. Again, section 

1886(r)(2)(A)(ii) of the Act provides 

authority to estimate this amount. 

Therefore, Factor 1 is the difference 

between our estimates of: (1) the amount 

that would have been paid in Medicare 

DSH payments for the fiscal year, in the 

absence of the new payment provision; 

and (2) the amount of empirically 

justified Medicare DSH payments that 

are made for the fiscal year, which takes 

into account the requirement to pay 25 

percent of what would have otherwise 

been paid under section 1886(d)(5)(F) of 

the Act. In other words, this factor 

represents our estimate of 75 percent 

(100 percent minus 25 percent) of our 

estimate of Medicare DSH payments 

that would otherwise be made, in the 

absence of section 1886(r) of the Act, for 

the fiscal year. 

As we did for FY 2015, in order to 

determine Factor 1 in the 

uncompensated care payment formula 

for FY 2016, we are proposing to 

continue the policy established in the 

FY 2014 IPPS/LTCH PPS final rule (78 

FR 50628 through 50630) and in the FY 

2014 IPPS interim final rule with 

comment period (78 FR 61194) of 

determining Factor 1 by developing 

estimates of both the aggregate amount 

of Medicare DSH payments that would 

be made in the absence of section 

1886(r)(1) of the Act and the aggregate 

amount of empirically justified 

Medicare DSH payments to hospitals 

under 1886(r)(1) of the Act through 

rulemaking. These estimates will not be 

revised or updated after we know the 

final Medicare DSH payments for FY 

2016. 

Therefore, in order to determine the 

two elements of Factor 1 (Medicare DSH 

payments prior to the application of 

section 1886(r)(1) of the Act, and 

empirically justified Medicare DSH 

payments after application of section 

1886(r)(1) of the Act), in FYs 2014 and 

2015, we used the most recently 

available projections of Medicare DSH 

payments for the applicable fiscal year, 

as calculated by CMS’ Office of the 

Actuary using the most recently filed 

Medicare hospital cost report with 

Medicare DSH payment information and 

the most recent Medicare DSH patient 

percentages and Medicare DSH payment 

adjustments provided in the IPPS 

Impact File. 

For purposes of calculating Factor 1 

and modeling the impact of this 

provision for this FY 2016 IPPS/LTCH 

PPS proposed rule, we used the Office 

of the Actuary’s February 2015 

Medicare DSH estimates, which are 

based on data from the December 2014 

update of the Medicare Hospital Cost 

Report Information System (HCRIS), 

2012 cost report data provided to CMS 

by IHS hospitals, and the FY 2015 IPPS/ 

LTCH PPS final rule IPPS Impact File, 

published in conjunction with the 

publication of the FY 2015 IPPS/LTCH 

PPS final rule. Because SCHs that are 

projected to be paid under their 

hospital-specific rate are not subject to 

the provisions of section 1886(r) of the 

Act, these hospitals were excluded from 

the February 2015 Medicare DSH 

estimates. Furthermore, because section 

1886(r) of the Act specifies that the 

uncompensated care payment is in 

addition to the empirically justified 

DSH payment (or 25 percent of DSH 

payments that would be made without 

regard to section 1886(r)), Maryland 

hospitals participating in the Maryland 

All-Payer Model and hospitals 

participating in the Rural Community 

Hospital Demonstration that do not 

receive DSH payments also are excluded 

from the Office of the Actuary’s 

Medicare DSH estimates. 

Using the data sources discussed 

above, the Office of the Actuary uses the 

most recently submitted Medicare cost 

report data to identify current Medicare 

DSH payments and the most recent DSH 

payment adjustments provided in the 

IPPS Impact File, and applies inflation 

updates and assumptions for future 

changes in utilization and case-mix to 

estimate Medicare DSH payments for 

the upcoming fiscal year. The February 

2015 Office of the Actuary estimate for 

Medicare DSH payments for FY 2016, 

without regard to the application of 

section 1886(r)(1) of the Act, is 

approximately $13.338 billion. This 

estimate excludes Maryland hospitals 

participating in the Maryland All-Payer 

Model, SCHs paid under their hospitalspecific payment rate, and hospitals 

participating in the Rural Community 

Hospital Demonstration, as indicated 

earlier. Therefore, based on the February 

2015 estimate, the estimate for 

empirically justified Medicare DSH 

payments for FY 2016, with the 

application of section 1886(r)(1) of the 

Act, is $3.335 billion (25 percent of the 

total amount estimated). Under 

§ 412.l06(g)(1)(i) of the regulations, 

Factor 1 is the difference between these 

two estimates of the Office of the 

Actuary. Therefore, in this proposed 

rule, we are proposing that Factor 1 for 

FY 2016 is $10,003,425,327.39 

($13,337,900,436.52 minus 

$3,334,475,109.13). We are inviting 

public comments on our proposed 

calculation of Factor 1 for FY 2016. 

The Office of the Actuary’s estimates 

for FY 2016 begin with a baseline of 

$11.632 billion in Medicare DSH 

expenditures for FY 2012. The following 

table shows the factors applied to 

update this baseline through the current 

estimate for FY 2016: 


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FACTORS APPLIED FOR FY 2013 THROUGH FY 2016 TO ESTIMATE MEDICARE DSH EXPENDITURES USING FY 2012 

BASELINE

FY Update Discharge Case-Mix Other Total 

Estimated 

DSH 

payments 

(in billion) 

2013 ......................................................... 1.028 0.9844 1.014 1.0139 1.040394 $12 .102 

2014 ......................................................... 1.009 0.9595 1.015 0.9993 0.98197 $11 .884 

2015 ......................................................... 1.014 0.9885 1.005 1.0485 1.056207 $12 .552 

2016 ......................................................... 1.011 1.0012 1.005 1.0446 1.062645 $13 .338 

In this table, the discharge column 

shows the increase in the number of 

Medicare fee-for-service (FFS) inpatient 

hospital discharges. The figures for FYs 

2013 and 2014 are based on Medicare 

claims data that have been adjusted by 

a completion factor. The discharge 

figure for FY 2015 is based on 

preliminary data for 2015. The 

discharge figure for FY 2016 is an 

assumption based on recent trends 

recovering back to the long-term trend 

and assumptions related to how many 

beneficiaries will be enrolled in 

Medicare FFS and also Medicare 

Advantage (MA) plans. The case-mix 

column shows the increase in case-mix 

for IPPS hospitals. The case-mix figures 

for FYs 2013 and 2014 are based on 

actual data adjusted by a completion 

factor. The FY 2015 and FY 2016 

increases are based on the 

recommendation of the 2010–2011 

Medicare Technical Review Panel. The 

‘‘other’’ column shows the increase in 

other factors that contribute to the 

Medicare DSH estimates. These factors 

include the difference between the total 

inpatient hospital discharges and the 

IPPS discharges, various adjustments to 

the payment rates that have been 

included over the years but are not 

reflected in the other columns (such as 

the increase in rates for the Cape Cod 

litigation and the reduction in rates for 

the 2-midnight stay policy). In addition, 

the ‘‘other’’ column includes a factor for 

the Medicaid expansion due to the 

Affordable Care Act. 

The next table below shows the 

factors that are included in the 

‘‘Update’’ column of the above table: 

FY Market basket 

percentage 

Affordable 

Care Act 

payment reductions 

Multifactor 

productivity adjustment 

Documentation 

and coding 

percentage adjustment 

Total update 

percentage 

2013 ........................................................................... 2.6 ¥0.1 ¥0.7 ¥1.0 2.8 

2014 ........................................................................... 2.5 ¥0.3 ¥0.5 ¥0.8 0.9 

2015 ........................................................................... 2.9 ¥0.2 ¥0.5 ¥0.8 1.4 

2016 ........................................................................... 2.7 ¥0.2 ¥0.6 ¥0.8 1.1 

Note: All numbers are based on the FY 2016 President’s Budget projections. 

(2) Calculation of Proposed Factor 2 for 

FY 2016 

Section 1886(r)(2)(B) of the Act 

establishes Factor 2 in the calculation of 

the uncompensated care payment. 

Specifically, section 1886(r)(2)(B)(i) of 

the Act provides that for each of FYs 

2014, 2015, 2016, and 2017, a factor 

equal to 1 minus the percent change in 

the percent of individuals under the age 

of 65 who are uninsured, as determined 

by comparing the percent of such 

individuals (I) who are uninsured in 

2013, the last year before coverage 

expansion under the Affordable Care 

Act (as calculated by the Secretary 

based on the most recent estimates 

available from the Director of the 

Congressional Budget Office before a 

vote in either House on the Health Care 

and Education Reconciliation Act of 

2010 that, if determined in the 

affirmative, would clear such Act for 

enrollment); and (II) who are uninsured 

in the most recent period for which data 

are available (as so calculated), minus 

0.1 percentage point for FY 2014 and 

minus 0.2 percentage point for each of 

FYs 2015, 2016, and 2017. 

Section 1886(r)(2)(B)(i)(I) of the Act 

further indicates that the percent of 

individuals under 65 without insurance 

in 2013 must be the percent of such 

individuals who are uninsured in 2013, 

the last year before coverage expansion 

under the Affordable Care Act (as 

calculated by the Secretary based on the 

most recent estimates available from the 

Director of the Congressional Budget 

Office before a vote in either House on 

the Health Care and Education 

Reconciliation Act of 2010 that, if 

determined in the affirmative, would 

clear such Act for enrollment). The 

Health Care and Education 

Reconciliation Act (Pub. L. 111–152) 

was enacted on March 30, 2010. It was 

passed in the House of Representatives 

on March 21, 2010, and by the Senate 

on March 25, 2010. Because the House 

of Representatives was the first House to 

vote on the Health Care and Education 

Reconciliation Act of 2010 on March 21, 

2010, we have determined that the most 

recent estimate available from the 

Director of the Congressional Budget 

Office ‘‘before a vote in either House on 

the Health Care and Education 

Reconciliation Act of 2010 . . .’’ 

(emphasis added) appeared in a March 

20, 2010 letter from the director of the 

CBO to the Speaker of the House. 

Therefore, we believe that only the 

estimates in this March 20, 2010 letter 

meet the statutory requirement under 

section 1886(r)(2)(B)(i)(I) of the Act. (To 

view the March 20, 2010 letter, we refer 

readers to the Web site at: http://

www.cbo.gov/sites/default/files/

cbofiles/ftpdocs/113xx/doc11379/ 

amendreconprop.pdf.) 

In its March 20, 2010 letter to the 

Speaker of the House of Representatives, 

the CBO provided two estimates of the 

‘‘post-policy uninsured population.’’ 

The first estimate is of the ‘‘Insured 

Share of the Nonelderly Population 

Including All Residents’’ (82 percent) 

and the second estimate is of the 

‘‘Insured Share of the Nonelderly 

Population Excluding Unauthorized 

Immigrants’’ (83 percent). In the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50631), we used the first estimate that 

includes all residents, including 


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unauthorized immigrants. We stated 

that we believe this estimate is most 

consistent with the statute, which 

requires us to measure ‘‘the percent of 

individuals under the age of 65 who are 

uninsured’’ and provides no exclusions 

except for individuals over the age of 

65. In addition, we stated that we 

believe that this estimate more fully 

reflects the levels of uninsurance in the 

United States that influence 

uncompensated care for hospitals than 

the estimate that reflects only legal 

residents. The March 20, 2010 CBO 

letter reports these figures as the 

estimated percentage of individuals 

with insurance. However, because 

section 1886(r)(2)(B)(i) of the Act 

requires that we compare the percent of 

individuals who are uninsured in the 

applicable year with the percent of 

individuals who were uninsured in 

2013, in the FY 2014 IPPS/LTCH PPS 

final rule, we used the CBO insurance 

rate figure and subtracted that amount 

from 100 percent (that is the total 

population without regard to insurance 

status) to estimate the 2013 baseline 

percent of individuals without 

insurance. Therefore, for FYs 2014 

through 2017, our estimate of the 

uninsurance percentage for 2013 is 18 

percent. 

Section 1886(r)(2)(B)(i) of the Act 

requires that we compare the baseline 

uninsurance rate to the percent of such 

individuals ‘‘who are uninsured in the 

most recent period for which data is 

available (as so calculated).’’ In the FY 

2014 and FY 2015 IPPS/LTCH PPS final 

rules (78 FR 50634 and 79 FR 50014), 

we used the same data source, the most 

recent available CBO estimates, to 

calculate this percent of individuals 

without insurance. In response to public 

comments, we also agreed that we 

should normalize the CBO estimates, 

which are based on the calendar year, 

for the Federal fiscal years for which 

each calculation of Factor 2 is made (78 

FR 50633). Therefore, for this FY 2016 

IPPS/LTCH PPS proposed rule, we used 

the CBO’s January 2015 estimates of the 

effects of the Affordable Care Act on 

health insurance coverage (which are 

available at http://www.cbo.gov/sites/ 

default/files/cbofiles/attachments/

43900-2014-04-ACAtables2.pdf) to 

calculate the percent of individuals 

without insurance. The CBO’s January 

2015 estimate of individuals under the 

age of 65 with insurance in CY 2015 is 

87 percent. Therefore, the CBO’s most 

recent estimate of the rate of 

uninsurance in CY 2015 is 13 percent 

(that is, 100 percent minus 87 percent.) 

Similarly, the CBO’s January 2015 

estimate of individuals under the age of 

65 with insurance in CY 2016 is 89 

percent. Therefore, the CBO’s most 

recent estimate of the rate of 

uninsurance in CY 2016 available for 

this proposed rule is 11 percent (that is, 

100 percent minus 89 percent.) 

The calculation of the proposed 

Factor 2 for FY 2016, employing a 

weighted average of the CBO projections 

for CY 2015 and CY 2016, is as follows: 

• CY 2015 rate of insurance coverage 

(January 2015 CBO estimate): 87 

percent. 

• CY 2016 rate of insurance coverage 

(January 2015 CBO estimate): 89 

percent. 

• FY 2016 rate of insurance coverage: 

(87 percent * .25)+(89 percent * .75) 

= 88.5 percent. 

• Percent of individuals without 

insurance for 2013 (March 2010 CBO 

estimate): 18 percent 

• Percent of individuals without 

insurance for FY 2016 (weighted 

average): 11.5 percent 

1¥((0.115¥0.18)/0.18) = 1¥0.3611 = 

0.6389 (63.89 percent) 

0.6389 (63.89 percent)¥.002 (0.2 

percentage points for FY 2016 

under section 1886(r)(2)(B)(i) of the 

Act) = 0.6369 or 63.69 percent 

0.6369 = Factor 2 

Therefore, the proposed Factor 2 for 

FY 2016 is 63.69 percent. Our proposal 

for Factor 2 is subject to change if more 

recent CBO estimates of the insurance 

rate become available at the time of the 

preparation of the final rule. We are 

inviting public comments on our 

proposed calculation of Factor 2 for FY 

2016. 

The FY 2016 Proposed 

Uncompensated Care Amount is: 

$10,003,425,327.39 × 0.6369 = 

$6,371,181,591.01. 

FY 2016 Proposed Uncompensated Care 

Total Available ........ $6,371,181,591.01 

(3) Calculation of Proposed Factor 3 for 

FY 2016 

Section 1886(r)(2)(C) of the Act 

defines Factor 3 in the calculation of the 

uncompensated care payment. As we 

have discussed earlier, section 

1886(r)(2)(C) of the Act states that Factor 

3 is equal to the percent, for each 

subsection (d) hospital, that represents 

the quotient of (i) the amount of 

uncompensated care for such hospital 

for a period selected by the Secretary (as 

estimated by the Secretary, based on 

appropriate data (including, in the case 

where the Secretary determines 

alternative data are available that is a 

better proxy for the costs of subsection 

(d) hospitals for treating the uninsured, 

the use of such alternative data)); and 

(ii) the aggregate amount of 

uncompensated care for all subsection 

(d) hospitals that receive a payment 

under section 1886(r) of the Act for such 

period (as so estimated, based on such 

data). 

Therefore, Factor 3 is a hospitalspecific value that expresses the 

proportion of the estimated 

uncompensated care amount for each 

subsection (d) hospital and each 

subsection (d) Puerto Rico hospital with 

the potential to receive Medicare DSH 

payments relative to the estimated 

uncompensated care amount for all 

hospitals estimated to receive Medicare 

DSH payments in the fiscal year for 

which the uncompensated care payment 

is to be made. Factor 3 is applied to the 

product of Factor 1 and Factor 2 to 

determine the amount of the 

uncompensated care payment that each 

eligible hospital will receive for FY 

2014 and subsequent fiscal years. In 

order to implement the statutory 

requirements for this factor of the 

uncompensated care payment formula, 

it was necessary to determine: (1) The 

definition of uncompensated care or, in 

other words, the specific items that are 

to be included in the numerator (that is, 

the estimated uncompensated care 

amount for an individual hospital) and 

the denominator (that is, the estimated 

uncompensated care amount for all 

hospitals estimated to receive Medicare 

DSH payments in the applicable fiscal 

year); (2) the data source(s) for the 

estimated uncompensated care amount; 

and (3) the timing and manner of 

computing the quotient for each 

hospital estimated to receive Medicare 

DSH payments. The statute instructs the 

Secretary to estimate the amounts of 

uncompensated care for a period based 

on appropriate data. In addition, we 

note that the statute permits the 

Secretary to use alternative data in the 

case where the Secretary determines 

that such alternative data are available 

that are a better proxy for the costs of 

subsection (d) hospitals for treating 

individuals who are uninsured. 

In the course of considering how to 

determine Factor 3 during the 

rulemaking process for FY 2014, we 

considered defining the amount of 

uncompensated care for a hospital as 

the uncompensated care costs of each 

hospital and determined that Worksheet 

S–10 of the Medicare cost report 

potentially provides the most complete 

data regarding uncompensated care 

costs for Medicare hospitals. However, 

because of concerns regarding variations 

in the data reported on the Worksheet 

S–10 and the completeness of these 


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data, we did not propose to use data 

from the Worksheet S–10 to determine 

the amount of uncompensated care for 

FY 2014, the first year this provision 

was in effect, or for FY 2015. We instead 

employed the utilization of insured lowincome patients, defined as inpatient 

days of Medicaid patients plus inpatient 

days of Medicare SSI patients as defined 

in 42 CFR 412.106(b)(4) and 

412.106(b)(2)(i), respectively, to 

determine Factor 3. We believed that 

this alternative data, which are 

currently reported on the Medicare cost 

report, would be a better proxy for the 

amount of uncompensated care 

provided by hospitals. We also 

indicated that we were expecting 

reporting on the Worksheet S–10 to 

improve over time and remained 

convinced that the Worksheet S–10 

could ultimately serve as an appropriate 

source of more direct data regarding 

uncompensated care costs for purposes 

of determining Factor 3 once hospitals 

gain greater experience and are 

submitting more accurate and consistent 

data through this reporting mechanism. 

For FY 2016, we believe it remains 

premature to propose the use of 

Worksheet S–10 for purposes of 

determining Factor 3 and, therefore, are 

proposing to continue to employ the 

utilization of insured low-income 

patients (defined as inpatient days of 

Medicaid patients plus inpatient days of 

Medicare SSI patients as defined in 

§ 412.106(b)(4) and § 412.106(b)(2)(i), 

respectively) to determine Factor 3. We 

believe this methodology would give 

hospitals more time to learn how to 

submit accurate and consistent data 

through Worksheet S–10, as well as give 

CMS more time to continue to work 

with the hospital community and others 

to develop the appropriate clarifications 

and revisions to Worksheet S–10 to 

ensure standardized and consistent 

reporting of all data elements. 

Accordingly, we are proposing that, for 

FY 2016, CMS will base its estimates of 

the amount of hospital uncompensated 

care on utilization data for Medicaid 

and Medicare SSI patients, as 

determined by CMS in accordance with 

§ 412.106(b)(2)(i) and (b)(4). We still 

intend to propose through future 

rulemaking the use of the Worksheet S– 

10 data for purposes of determining 

Factor 3. We are inviting public 

comments on this proposal to continue 

to use insured low-income days (that is, 

to use data for Medicaid and Medicare 

SSI patient days determined in 

accordance with § 412.106(b)(2)(i) and 

(b)(4) as a proxy as permitted by statute) 

to determine Factor 3 for FY 2016. 

As we did for the FY 2014 IPPS/LTCH 

PPS proposed rule and FY 2015 IPPS/ 

LTCH proposed rule, we will publish on 

the CMS Web site a table listing Factor 

3 for all hospitals that we estimate 

would receive empirically justified 

Medicare DSH payments in FY 2016 

(that is, hospitals that we project would 

receive interim uncompensated care 

payments during the fiscal year), and for 

the remaining subsection (d) hospitals 

and subsection (d) Puerto Rico hospitals 

that have the potential of receiving a 

DSH payment in the event that they 

receive an empirically justified 

Medicare DSH payment for the fiscal 

year as determined at cost report 

settlement. Hospitals will have 60 days 

from the date of public display of this 

FY 2016 IPPS/LTCH PPS proposed rule 

to review these tables and notify CMS 

in writing of a change in a hospital’s 

subsection (d) hospital status, such as if 

a hospital has closed or converted to a 

CAH. Comments can be submitted to the 

CMS inbox at Section3131DSH@

cms.hhs.gov. After the publication of the 

FY 2016 IPPS/LTCH final rule, hospitals 

will have until August 31, 2015, to 

review and submit comments on the 

accuracy of these tables. Comments can 

be submitted to the CMS inbox at 

Section3133DSH@cms.hhs.gov through 

August 31, 2015, and any changes to 

Factor 3 will be posted on the CMS Web 

site prior to October 1, 2015. 

The statute also allows the Secretary 

the discretion to determine the time 

periods from which we will derive the 

data to estimate the numerator and the 

denominator of the Factor 3 quotient. 

Specifically, section 1886(r)(2)(C)(i) of 

the Act defines the numerator of the 

quotient as the amount of 

uncompensated care for such hospital 

for a period selected by the Secretary. 

Section 1886(r)(2)(C)(ii) of the Act 

defines the denominator as the aggregate 

amount of uncompensated care for all 

subsection (d) hospitals that receive a 

payment under section 1886(r) for such 

period. In the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50638), we adopted a 

process of making interim payments 

with final cost report settlement for both 

the empirically justified Medicare DSH 

payments and the uncompensated care 

payments required by section 3133 of 

the Affordable Care Act. Consistent with 

that process, we also determined the 

time period from which to calculate the 

numerator and denominator of the 

Factor 3 quotient in a way that would 

be consistent with making interim and 

final payments. Specifically, we must 

have Factor 3 values available for 

hospitals that we estimate will qualify 

for Medicare DSH payments using the 

most recently available historical data 

and for those hospitals that we do not 

estimate will qualify for Medicare DSH 

payments but that may ultimately 

qualify for Medicare DSH payments at 

the time of cost report settlement. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50018), we finalized a policy 

to use the most recently available full 

year of Medicare cost report data for 

determining Medicaid days and the 

most recently available SSI ratios. This 

is consistent with the policy we adopted 

in the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50638) of calculating the 

numerator and the denominator of 

Factor 3 for hospitals based on the most 

recently available full year of Medicare 

cost report data (including the most 

recently available data that may be used 

to update the SSI ratios) with respect to 

a Federal fiscal year. In other words, we 

use data from the most recently 

available full year cost report for the 

Medicaid days, the most recent cost 

report data submitted to CMS by IHS 

hospitals, and the most recently 

available SSI ratios (that is, latest 

available SSI ratios before the beginning 

of the Federal fiscal year) for the 

Medicare SSI days. Therefore, to 

estimate Factor 3 for FY 2015, we used 

data from the most recently available 

full year cost report and the most recent 

cost report data submitted to CMS by 

IHS hospitals for the Medicaid days and 

the most recently available SSI ratios, 

which for FY 2015 were data obtained 

from the 2011/2012 cost reports and the 

2010 cost report data submitted by IHS 

hospitals for the Medicaid days, and the 

FY 2012 SSI ratios for the Medicare SSI 

days. 

Since the publication of the FY 2015 

IPPS/LTCH PPS final rule, we have been 

informed by the hospital community 

that they are experiencing difficulties 

with submitting accurate data for 

Medicaid days within the timeframes 

noted in the Provider Reimbursement 

Manual, Part 2 for a variety of reasons, 

such as their ability to receive eligibility 

data from State Medicaid agencies. (As 

outlined in Section 104, Chapter 1, of 

the Provider Reimbursement Manual, 

Part 2, a hospital generally has 5 months 

after the close of its cost reporting 

period to file its cost report.) In 

addition, we have been informed that 

there is variation in the ability of 

hospitals and MACs, respectively, to 

submit and accept amended cost report 

data in time for the computation of 

Factor 3. While we continue to believe 

that it is important to use data that are 

as recent as possible, we recognize that 

from time to time the balance between 

recency and accuracy may require 

refinement. In the case of Factor 3, 

because we make prospective 

determinations of the uncompensated 


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care payment without reconciliation, we 

believe that it would increase the 

accuracy of the data used to determine 

Factor 3, and accordingly each eligible 

hospital’s allocation of the overall 

uncompensated care amount, if we 

provided hospitals with more time to 

submit these data and MACs with more 

time to consider these submitted data 

before they are used in the computation 

of Factor 3. As we described in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50018), it is not possible for us to wait 

for a later database update of the cost 

report data to calculate the final Factor 

3 amount for the final rule because this 

could cause delay in the publication of 

the final rule. Therefore, we are unable 

to provide hospitals additional time to 

submit supplemental data, or for their 

MAC to consider and accept those data 

as applicable and appropriate. One 

alternative would be to use slightly 

older data within the most recent extract 

of the hospital cost report data in the 

HCRIS database. We believe that this 

would allow hospitals more time to 

submit data and MACs more time to 

consider and accept such data as 

applicable and appropriate. 

Therefore, for the computation of 

Factor 3 for FY 2016, we are proposing 

to hold constant the cost report years 

used to calculate Factor 3 and to use 

data from the 12-month 2012 or 2011 

cost reports and, in the case of IHS 

hospitals, the 2012 cost report data 

submitted to CMS by IHS hospitals. 

However, because a more recent HCRIS 

database is available at the time of this 

rulemaking, we are proposing that we 

continue to use the most recent HCRIS 

database extract available to us at the 

time of this annual rulemaking cycle. 

We note that, as in prior years, if the 

more recent of the two cost reporting 

periods does not reflect data for a 12- 

month period, we would use data from 

the earlier of the two periods so long as 

that earlier period reflects data for a 

period of 12 months. If neither of the 

two periods reflects 12 months, we 

would use the period that reflected a 

longer amount of time. We are 

proposing to codify this change for FY 

2016 by amending the regulations at 

§ 412.106(g)(1)(iii)(C). We are inviting 

public comments on this proposal, 

which we describe more fully below. 

For the FY 2015 IPPS/LTCH PPS final 

rule, we used the more recent of the full 

year 2012 or full year 2011 data from the 

March 2014 update of the hospital cost 

report data in the HCRIS database and 

cost report data submitted to CMS by 

IHS hospitals as of March 2014 to obtain 

the Medicaid days to calculate Factor 3. 

In addition, we used the FY 2012 SSI 

ratios published on the following CMS 

Web site to calculate Factor 3: http://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/

AcuteInpatientPPS/dsh.html. 

In contrast, under our proposal, for 

FY 2016, we would use the more recent 

of the full year 2012 or full year 2011 

data from the March 2015 update of the 

hospital cost report data in the HCRIS 

database and the 2012 cost report data 

submitted to CMS by IHS hospitals to 

obtain the Medicaid days to calculate 

Factor 3. In addition, to calculate Factor 

3 for FY 2016, we anticipate that, under 

our proposal discussed above, we would 

use the FY 2013 SSI ratios to be 

published on the following CMS Web 

site when they become available: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/dsh.html. For 

illustration purposes, in Table 18 

associated with this proposed rule 

(which is available via the Internet on 

the CMS Web site), we compute Factor 

3 using the more recent of the full year 

2012 or 2011 data from the December 

2014 update of the hospital cost report 

data in the HCRIS database to obtain the 

Medicaid days and the FY 2012 SSI 

ratios published on the CMS Web site 

at: http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/dsh.html. We 

anticipate using the more recent of the 

full year 2012 or 2011 data from the 

March 2015 update of the hospital cost 

report data in the HCRIS database to 

obtain the Medicaid days and the FY 

2013 SSI ratios to determine the final 

Factor 3 for FY 2016. 

For subsequent years, if we propose 

and finalize a policy of using insured 

low-income days in computing Factor 3, 

we intend to continue to use the most 

recent HCRIS database extract at the 

time of the annual rulemaking cycle, 

and to use the subsequent year of cost 

reports as applicable using the 

methodology described above (that is, to 

advance the 12-month cost reports by 1 

year). We note that, starting with the 

2013 cost reports, data for IHS hospitals 

will be included in the HCRIS. 

Therefore, if an IHS hospital has a 12- 

month 2013 cost reporting period in the 

HCRIS database, we will not need to use 

the 2012 data separately submitted to 

CMS by the IHS hospital. For example, 

if we finalize for FY 2017, a policy 

under which Factor 3 is determined on 

the basis of insured low-income days, 

this approach would result in the use of 

the more recent of the 12-month 2013 or 

2012 cost reports in the most recent 

HCRIS database extract available at the 

time of rulemaking. In addition, for any 

subsequent years in which we finalize a 

policy to use insured low-income days 

to compute Factor 3, our intention 

would be to continue to use the most 

recently available SSI ratio data to 

calculate Factor 3 at the time of annual 

rulemaking. We believe that it is 

appropriate to state our intentions 

regarding the specific data we would 

use in the event Factor 3 is determined 

on the basis of low-income insured days 

for subsequent years to provide 

hospitals with as much guidance as 

possible so they may best consider how 

and when to submit cost report 

information in the future. We note that 

we will make proposals with regard to 

our methodology for calculating Factor 

3 for subsequent years through noticeand-comment rulemaking. 

We are proposing to continue the 

policies that were finalized in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50020) to address several specific issues 

concerning the process and data to be 

employed in determining Factor 3 in the 

case of hospital mergers for FY 2016 and 

subsequent fiscal years. In order to 

confirm mergers and ensure the 

accuracy of the data used to determine 

each merged hospital’s uncompensated 

care payment, we will publish a table on 

the CMS Web site, in conjunction with 

the issuance of each Federal fiscal year’s 

IPPS/LTCH PPS proposed and final 

rules, that contains a list of the mergers 

that we are aware of and the computed 

uncompensated care payment for each 

merged hospital. Hospitals have 60 days 

from the date of public display of each 

year’s IPPS/LTCH PPS proposed rule to 

review these tables and notify CMS in 

writing of any inaccuracies. After the 

publication of the IPPS/LTCH PPS final 

rule, hospitals will have until August 31 

of that year (for FY 2016, the deadline 

is August 31, 2015) to review and 

submit comments on the accuracy of 

these tables for the applicable fiscal 

year. Comments can be submitted to our 

inbox at Section3133DSH@cms.hhs.gov 

through August 31, and any changes to 

Factor 3 will be posted on the CMS Web 

site prior to the start of the applicable 

fiscal year on October 1. We are inviting 

public comments on our proposal to 

continue these policies concerning the 

process and data to be employed in 

determining Factor 3 in the case of 

hospital mergers as described above. 

E. Hospital Readmissions Reduction 

Program: Proposed Changes for FY 2016 

Through FY 2017 (§§ 412.150 through 

412.154) 

1. Statutory Basis for the Hospital 

Readmissions Reduction Program 

Section 3025 of the Affordable Care 

Act, as amended by section 10309 of the 

Affordable Care Act, added a new 


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section 1886(q) to the Act. Section 

1886(q) of the Act establishes the 

‘‘Hospital Readmissions Reduction 

Program,’’ effective for discharges from 

an ‘‘applicable hospital’’ beginning on 

or after October 1, 2012, under which 

payments to those applicable hospitals 

may be reduced to account for certain 

excess readmissions. 

Section 1886(q)(1) of the Act sets forth 

the methodology by which payments to 

‘‘applicable hospitals’’ will be adjusted 

to account for excess readmissions. In 

accordance with section 1886(q)(1) of 

the Act, payments for discharges from 

an ‘‘applicable hospital’’ will be an 

amount equal to the product of the 

‘‘base operating DRG payment amount’’ 

and the adjustment factor for the 

hospital for the fiscal year. That is, 

‘‘base operating DRG payments’’ are 

reduced by a hospital-specific 

adjustment factor that accounts for the 

hospital’s excess readmissions. Section 

1886(q)(2) of the Act defines the base 

operating DRG payment amount as the 

payment amount that would otherwise 

be made under section 1886(d) of the 

Act (determined without regard to 

section 1886(o) of the Act [the Hospital 

VBP Program]) for a discharge if this 

subsection did not apply; reduced by 

any portion of such payment amount 

that is attributable to payments under 

paragraphs (5)(A), (5)(B), (5)(F), and (12) 

of section 1886(d) of the Act. Paragraphs 

(5)(A), (5)(B), (5)(F), and (12) of section 

1886(d) of the Act refer to outlier 

payments, IME payments, DSH 

adjustment payments, and add-on 

payments for low-volume hospitals, 

respectively. 

Furthermore, section 1886(q)(2)(B) of 

the Act specifies special rules for 

defining the payment amount that 

would otherwise be made under section 

1886(d) of the Act for certain hospitals, 

including policies for SCHs and for 

MDHs for FY 2013. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 

53374), we finalized policies to 

implement the statutory provisions 

related to the definition of ‘‘base 

operating DRG payment amount’’ with 

respect to those hospitals. 

Section 1886(q)(3)(A) of the Act 

defines the ‘‘adjustment factor’’ for an 

applicable hospital for a fiscal year as 

equal to the greater of (i) the ratio 

described in subparagraph (B) for the 

hospital for the applicable period (as 

defined in paragraph (5)(D)) for such 

fiscal year; or (ii) the floor adjustment 

factor specified in subparagraph (C). 

Section 1886(q)(3)(B) of the Act, in turn, 

describes the ratio used to calculate the 

adjustment factor. It states that the ratio 

is equal to 1 minus the ratio of—(i) the 

aggregate payments for excess 

readmissions and (ii) the aggregate 

payments for all discharges. Section 

1886(q)(3)(C) of the Act establishes the 

floor adjustment factor, which is set at 

0.97 for FY 2015 and subsequent fiscal 

years. 

Section 1886(q)(4) of the Act defines 

the terms ‘‘aggregate payments for 

excess readmissions’’ and ‘‘aggregate 

payments for all discharges’’ for an 

applicable hospital for the applicable 

period. The term ‘‘aggregate payments 

for excess readmissions’’ is defined in 

section 1886(q)(4)(A) of the Act as the 

sum, for applicable conditions of the 

product, for each applicable condition, 

of (i) the base operating DRG payment 

amount for such hospital for such 

applicable period for such condition; (ii) 

the number of admissions for such 

condition for such hospital for such 

applicable period; and (iii) the excess 

readmissions ratio for such hospital for 

such applicable period minus 1. The 

‘‘excess readmissions ratio’’ is a 

hospital-specific ratio based on each 

applicable condition. Specifically, 

section 1886(q)(4)(C) of the Act defines 

the excess readmissions ratio as the 

ratio of actual-over-expected 

readmissions; specifically, the ratio of 

‘‘risk-adjusted readmissions based on 

actual readmissions’’ for an applicable 

hospital for each applicable condition, 

to the ‘‘risk-adjusted expected 

readmissions’’ for the applicable 

hospital for the applicable condition. 

Section 1886(q)(5) of the Act provides 

definitions of ‘‘applicable condition,’’ 

‘‘expansion of applicable conditions,’’ 

‘‘applicable hospital,’’ ‘‘applicable 

period,’’ and ‘‘readmission.’’ The term 

‘‘applicable condition’’ (which is 

addressed in detail in section IV.C.3.a. 

of the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51665 through 51666)) is 

defined as a condition or procedure 

selected by the Secretary among 

conditions and procedures for which: (i) 

Readmissions represent conditions or 

procedures that are high volume or high 

expenditures and (ii) measures of such 

readmissions have been endorsed by the 

entity with a contract under section 

1890(a) of the Act and such endorsed 

measures have exclusions for 

readmissions that are unrelated to the 

prior discharge (such as a planned 

readmission or transfer to another 

applicable hospital). Section 

1886(q)(5)(B) of the Act also requires the 

Secretary, beginning in FY 2015, to the 

extent practicable, to expand the 

applicable conditions beyond the three 

conditions for which measures have 

been endorsed to the additional four 

conditions that have been identified by 

the MedPAC in its report to Congress in 

June 2007 and to other conditions and 

procedures as determined appropriate 

by the Secretary. 

Section 1886(q)(5)(C) of the Act 

defines ‘‘applicable hospital,’’ that is, a 

hospital subject to the Hospital 

Readmissions Reduction Program, as a 

subsection (d) hospital or a hospital that 

is paid under section 1814(b)(3) of the 

Act, as the case may be. The term 

‘‘applicable period,’’ as defined under 

section 1886(q)(5)(D) of the Act, means, 

with respect to a fiscal year, such period 

as the Secretary shall specify. As 

explained in the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51671), the 

‘‘applicable period’’ is the period during 

which data are collected in order to 

calculate various ratios and payment 

adjustments under the Hospital 

Readmissions Reduction Program. 

Section 1886(q)(6) of the Act sets forth 

the public reporting requirements for 

hospital-specific readmission rates. 

Section 1886(q)(7) of the Act limits 

administrative and judicial review of 

certain determinations made pursuant 

to section 1886(q) of the Act. Finally, 

section 1886(q)(8) of the Act requires 

the Secretary to collect data on 

readmission rates for all hospital 

inpatients (not just Medicare patients) 

for a broad range of both subsection (d) 

and nonsubsection (d) hospitals in order 

to calculate the hospital-specific 

readmission rates for all such hospital 

inpatients and to publicly report these 

‘‘all-patient’’ readmission rates. 

2. Regulatory Background 

The payment adjustment factor set 

forth in section 1886(q) of the Act did 

not apply to discharges until FY 2013. 

In the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51660 through 51676), we 

addressed the issues of the selection of 

readmission measures and the 

calculation of the excess readmissions 

ratio, which will be used, in part, to 

calculate the readmissions adjustment 

factor. Specifically, in that final rule, we 

finalized policies that relate to the 

portions of section 1886(q) of the Act 

that address the selection of and 

measures for the applicable conditions, 

the definitions of ‘‘readmission’’ and 

‘‘applicable period,’’ and the 

methodology for calculating the excess 

readmissions ratio. We also established 

policies with respect to measures for 

readmission for the applicable 

conditions and our methodology for 

calculating the excess readmissions 

ratio. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53374 through 53401), we 

finalized policies that relate to the 

portions of section 1886(q) of the Act 

that address the calculation of the 

hospital readmission payment 


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adjustment factor and the process by 

which hospitals can review and correct 

their data. Specifically, in that final 

rule, we addressed the base operating 

DRG payment amount, aggregate 

payments for excess readmissions and 

aggregate payments for all discharges, 

the adjustment factor, applicable 

hospital, limitations on review, and 

reporting of hospital-specific 

information, including the process for 

hospitals to review readmission 

information and submit corrections. We 

also established a new Subpart I under 

42 CFR part 412 (§§ 412.150 through 

412.154) to codify rules for 

implementing the Hospital 

Readmissions Reduction Program. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50649 through 50676), we 

finalized our policies that relate to 

refinement of the readmissions 

measures and related methodology for 

the current applicable conditions, 

expansion of the ‘‘applicable 

conditions’’ for FY 2015 and subsequent 

fiscal years, and clarification of the 

process for reporting hospital-specific 

information, including the opportunity 

to review and submit corrections. We 

also established policies related to the 

calculation of the adjustment factor for 

FY 2014. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50024 through 50048), we 

made refinements to the readmissions 

measures and related methodology for 

applicable conditions for FY 2015 and 

subsequent fiscal years, expanded the 

‘‘applicable conditions’’ for FY 2017 

and subsequent fiscal years, discussed 

the maintenance of technical 

specifications for quality measures, and 

described a waiver from the Hospital 

Readmissions Reduction Program for 

hospitals formerly paid under section 

1814(b)(3) of the Act (§ 412.154(d)). We 

also specified the applicable period for 

FY 2015 and made changes to the 

calculation of the aggregate payments 

for excess readmissions to include two 

additional applicable conditions for the 

FY 2015 payment determination. 

3. Overview of Proposed Policies 

Changes for the FY 2016 and FY 2017 

Hospital Readmissions Reduction 

Program 

In this proposed rule, we are 

proposing to— 

• Make a refinement to the 

pneumonia readmissions measure, 

which would expand the measure 

cohort, for the FY 2017 payment 

determination and subsequent years 

(section IV.E.4. of the preamble of this 

proposed rule); and 

• Adopt an extraordinary 

circumstance exception policy to 

address hospitals that experience a 

disaster or other extraordinary 

circumstance beginning in FY 2016 and 

for subsequent years (section IV.E.9. of 

the preamble of this proposed rule). 

4. Proposed Refinement of the Hospital 

30-Day, All-Cause, Risk-Standardized 

Readmission Rate (RSRR) Following 

Pneumonia Hospitalization Measure 

Cohort for the FY 2017 Payment 

Determination and Subsequent Years 

a. Background 

In this proposed rule, for the FY 2017 

payment determination and subsequent 

years, we are proposing a refinement of 

the currently National Quality Forum 

(NQF) endorsed CMS Hospital 30-Day, 

All-Cause, Risk-Standardized 

Readmission Rate (RSRR) following 

Pneumonia Hospitalization measure 

(NQF #0506) (hereafter referred to as the 

CMS 30-Day Pneumonia Readmission 

Measure (NQF #0506)), which expands 

the measure cohort. For the purposes of 

describing the refinement of this 

measure, we note that ‘‘cohort’’ is 

defined as the hospitalizations, or 

‘‘index admissions,’’ that are included 

in the measure. This cohort is the set of 

hospitalizations that meet all of the 

inclusion and exclusion criteria, and we 

are proposing an expansion to this set 

of hospitalizations. The previously 

adopted CMS 30-day Pneumonia 

Readmission Measure (NQF #0506) 

included hospitalizations for patients 

with a principal discharge diagnosis of 

pneumonia indicating viral or bacterial 

pneumonia. For measure cohort details 

of the currently implemented measure, 

we refer readers to the measure 

methodology report and measure risk 

adjustment statistical model on our Web 

site at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

This proposed measure refinement 

would expand the measure cohort to 

include hospitalizations for patients 

with a principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

either sepsis or respiratory failure who 

also have a secondary diagnosis of 

pneumonia present on admission. 

Including such patients would better 

represent the complete population of a 

hospital’s patients who are receiving 

clinical management and treatment for 

pneumonia, as well as to ensure the 

measure includes more complete and 

comparable populations across 

hospitals. In addition, use of 

comparable populations would reduce 

measurement bias resulting from 

different coding practices seen across 

hospitals. We believe that measure 

results derived from refinement of the 

measure cohort in the manner we are 

proposing would improve the measure’s 

assessment of avoidable readmissions 

and more accurately reflect quality and 

outcome for pneumonia patients. The 

determination to refine the measure 

cohort was based on our evaluation of 

both the frequency and variation in 

utilization of these diagnosis codes, and 

as such coding practices have been 

described in recently published studies. 

The rationale for expanding the measure 

cohort for the CMS 30-Day Pneumonia 

Readmission Measure (NQF #0506) is 

further described in section VIII.A.6.b. 

of the preamble of this proposed rule 

under our discussion of proposed 

refinements for the Hospital IQR 

Program. 

b. Overview of Measure Cohort Change 

The proposed measure refinement 

would expand the cohort to include 

hospitalizations for patients with a 

principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

either sepsis or respiratory failure who 

also have a secondary diagnosis of 

pneumonia that is coded as present on 

admission. The data sources, exclusion 

criteria, and assessment of the outcome 

of readmission remain unchanged. 

The proposed refinement of the CMS 

30-Day Pneumonia Readmission 

Measure (NQF #0506) with this 

expanded measure cohort was reviewed 

by the Measure Applications 

Partnership (MAP), which conditionally 

supported use of the measure update for 

the Hospital Readmissions Reduction 

Program pending NQF review of the 

measure update and appropriate 

consideration under the NQF 

sociodemographic status pilot, if 

required, as detailed in its PreRulemaking 2015 MAP 

Recommendations Report available at: 

https://www.qualityforum.org/Setting_

Priorities/Partnership/MAP_Final_

Reports.aspx. This measure will be 

submitted to NQF for reendorsement 

when the appropriate project has its call 

for measures in 2015. 

We note that during the MAP Hospital 

Workgroup and MAP Coordinating 

Committee in-person meetings, some 

members discussed the benefit of a 

phased approach that would first allow 

for public reporting of the refined 

measure before implementing it in a 

pay-for-performance program in order to 

allow providers to gain experience with 

the measure refinement, while other 

members expressed concern that this 

would delay implementation of an 

improved measure and also cause 


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alignment issues and potential 

confusion among providers. The MAP 

supported the use of the measure 

refinement without stipulating prior 

public reporting as a condition of 

support. However, we acknowledge the 

importance of this consideration and 

took it into account when determining 

to propose implementation of the 

measure refinement in the Hospital 

Readmissions Reduction Program 

beginning with the FY 2017 payment 

determination. 

We considered other options in 

proposing when to implement the 

refinement of the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) in the Hospital Readmissions 

Reduction Program, including the 

option to implement the measure 

refinement beginning with the FY 2018 

payment determination. Delaying 

implementation of the measure 

refinement until FY 2018 would allow 

hospitals to gain more experience with 

the impact of the measure refinement on 

their measure results and excess 

readmissions ratios. However, it also 

would mean delaying use of an 

improved measure that we believe will 

better represent the complete 

population of a hospital’s pneumonia 

patients and better reflect comparable 

pneumonia patients across hospitals. 

Delaying implementation of the measure 

refinement for the Hospital 

Readmissions Reduction Program could 

also potentially increase confusion 

among hospitals as well as raise 

alignment issues with other CMS 

hospital inpatient quality reporting and 

payment programs that use the same 

measure. 

After considering these options, we 

are proposing to begin with the FY 2017 

payment determination to implement 

the refinement of the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) in the Hospital Readmissions 

Reduction Program. We believe that 

after weighing the considerations, the 

proposed measure refinement should be 

incorporated into the Hospital 

Readmissions Reduction Program as 

soon as statutorily and operationally 

feasible, primarily because improving 

the measure in the manner we are 

proposing will greatly improve the 

measure’s assessment of quality and 

outcome for pneumonia patients and, 

therefore, its implementation should not 

be unnecessarily delayed. 

c. Risk Adjustment 

The risk adjustment and statistical 

modeling approach as well as the 

measure calculation remain unchanged 

from the previously adopted measure. 

However, we did confirm the use of 

current risk-adjustment variables in the 

expanded measure cohort by confirming 

their association with the outcome. We 

also examined additional risk variables 

leading to the addition of a few 

additional risk variables in the measure. 

For the full measure specifications of 

the proposed refinement of the measure 

cohort, we refer readers to the CMS Web 

site at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

d. Anticipated Effects of Refinement of 

Hospital 30-Day, All-Cause, RiskStandardized Readmission Rate (RSRR) 

Following Pneumonia Hospitalization 

Measure (NQF #0506) Cohort 

Using administrative claims data for 

FY 2015 (that is, discharges between 

July 2010 and June 2013), we analyzed 

and simulated the effect of the proposed 

measure cohort refinements on the CMS 

30-Day Pneumonia Readmission 

Measure (NQF #0506) as if these 

changes had been applied for the 

Hospital Readmissions Reduction 

Program FY 2015 payment 

determination. We note that these 

statistics are for illustrative purposes 

only, and we are not proposing to revise 

the measure calculations for FY 2015, 

nor for FY 2016. Rather, we are 

proposing to apply these changes to the 

CMS 30-Day Pneumonia Readmission 

Measure (NQF #0506) for the FY 2017 

payment determination and subsequent 

years. Based on our analysis, we 

anticipate that expanding the measure 

cohort to include a broader population 

of patients would add a large number of 

patients, as well as additional hospitals 

(which would now meet the minimum 

threshold of 25 eligible cases), to the 

CMS 30-Day Pneumonia Readmission 

Measure (NQF #0506). In the FY 2012 

IPPS/LTCH PPS final rule (76 FR 

51672), we established that if a hospital 

has fewer than 25 eligible cases for a 

measure, we will assign the hospital to 

a separate category indicating that the 

number of cases is too small to reliably 

indicate how well the hospital is 

performing. These cases are still used to 

calculate the measure. However, for 

hospitals with fewer than 25 eligible 

cases, the hospital’s readmission rates 

and interval estimates will not be 

publicly reported for the measure. The 

increase in the size of the measure 

cohort proposed in this proposed rule 

would change results for many hospitals 

and would change the number of 

hospitals that have greater than 25 

cases. 

The previously adopted pneumonia 

readmission measure cohort for the 

Hospital Readmissions Reduction 

Program included 976,471 patients and 

3,137 hospitals for FY 2015. We noted 

the following effects for the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) if the expanded cohort had been 

applied for FY 2015: (1) The expansion 

of the readmission cohort would 

include an additional 634,519 patients 

(representing a 65 percent increase, for 

a total measure cohort of 1,610,990 

patients); (2) an additional 42 hospitals 

(representing a 1.3 percent increase) 

would meet the minimum 25 patient 

cases volume threshold over the 3-year 

applicable period and would be 

publicly reported for the measure; (3) 

patients with a principal discharge 

diagnosis of aspiration pneumonia and 

patients with a principal discharge 

diagnosis of sepsis or respiratory failure 

who also have a secondary diagnosis of 

pneumonia present on admission would 

represent 40 percent of the total 

expanded measure cohort; (4) the 

national observed readmission rate 

would increase by 0.9 absolute 

percentage points; and, (5) the proposed 

cohort refinement would affect the 

excess readmissions ratios for some 

hospitals. A detailed description of the 

refinement to the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) and the effects of the measure 

update are available on our Web site at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

e. Calculating the Excess Readmissions 

Ratio 

The proposed refinement of the 

measure cohort for the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) would use the same 

methodology and statistical modeling 

approach as the previously adopted 

CMS 30-Day Pneumonia Readmission 

Measure (NQF #0506) for the Hospital 

Readmissions Reduction Program, as 

well as the other Hospital Readmissions 

Reduction Program measures. We 

published a detailed description of how 

the readmission measures estimate the 

excess readmissions ratios in the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53380 through 53381). 

We note that the set of hospitals for 

which this refined measure would be 

calculated for the Hospital 

Readmissions Reduction Program differs 

from those used in calculations for the 

Hospital IQR Program. The Hospital 

Readmissions Reduction Program 

includes only subsection (d) hospitals as 

defined in section 1886(d)(1)(B) of the 

Act (and, if not waived from 

participating, those hospitals paid under 

section 1814(b)(3) of the Act), while the 


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Hospital IQR Program calculations 

include non-IPPS hospitals, such as 

CAHs, cancer hospitals, and hospitals 

located in the Territories of the United 

States. However, we believe that 

adoption of the refinement to the 

measure cohort for the CMS 30-Day 

Pneumonia Readmission Measure (NQF 

#0506) would be appropriate for both 

programs. 

In summary, we are proposing a 

refinement of the NQF endorsed CMS 

30-Day Pneumonia Readmission 

Measure (NQF #0506), which expands 

the measure cohort, in the Hospital 

Readmissions Reduction Program for 

the FY 2017 payment determination and 

subsequent years. 

We are inviting public comment on 

this proposal. 

5. Maintenance of Technical 

Specifications for Quality Measures 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50039) for 

a discussion of the maintenance of 

technical specifications for quality 

measures for the Hospital Readmissions 

Reduction Program. Technical 

specifications of the readmission 

measures are provided on our Web site 

in the Measure Methodology Reports at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. Additional 

resources about the Hospital 

Readmissions Reduction Program and 

measure technical specifications are on 

the QualityNet Web site on the 

Resources page at: http://www.quality

net.org/dcs/ContentServer?c=Page&

pagename=QnetPublic%2FPage%2

FQnetTier3&cid=1228772412995. 

6. Floor Adjustment Factor for FY 2016 

(§ 412.154(c)(2)) 

Section 1886(q)(3)(A) of the Act 

defines the ‘‘adjustment factor’’ for an 

applicable hospital for a fiscal year as 

equal to the greater of (i) the ratio 

described in subparagraph (B) for the 

hospital for the applicable period (as 

defined in paragraph (5)(D)) for such 

fiscal year; or (ii) the floor adjustment 

factor specified in subparagraph (C). 

Section 1886(q)(3)(B) of the Act, in turn, 

describes the ratio used to calculate the 

adjustment factor. Specifically, it states 

that the ratio is equal to 1 minus the 

ratio of—(i) the aggregate payments for 

excess readmissions and (ii) the 

aggregate payments for all discharges. 

The calculation of this ratio is codified 

at § 412.154(c)(1) of the regulations. 

Section 1886(q)(3)(C) of the Act 

specifies the floor adjustment factor, 

which is set at 0.97 for FY 2015 and 

subsequent fiscal years. We codified the 

floor adjustment factor at § 412.154(c)(2) 

of the regulations (77 FR 53386). 

Consistent with section 1886(q)(3) of 

the Act, codified at § 412.154(c)(2), the 

adjustment factor is either the greater of 

the ratio or, for FY 2015 and subsequent 

fiscal years, a floor adjustment factor of 

0.97. Under our established policy, the 

ratio is rounded to the fourth decimal 

place. In other words, for FY 2015 and 

subsequent fiscal years, a hospital 

subject to the Hospital Readmissions 

Reduction Program will have an 

adjustment factor that is between 1.0 (no 

reduction) and 0.9700 (greatest possible 

reduction). 

7. Proposed Applicable Period for FY 

2016 

Under section 1886(q)(5)(D) of the 

Act, the Secretary has the authority to 

specify the applicable period with 

respect to a fiscal year under the 

Hospital Readmissions Reduction 

Program. In the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51671), we 

finalized our policy to use 3 years of 

claims data to calculate the readmission 

measures. In the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53675), we 

codified the definition of ‘‘applicable 

period’’ in the regulations at 42 CFR 

412.152 as the 3-year period from which 

data are collected in order to calculate 

excess readmissions ratios and 

adjustments for the fiscal year, which 

includes aggregate payments for excess 

readmissions and aggregate payments 

for all discharges used in the calculation 

of the payment adjustment. 

Consistent with the definition 

specified at § 412.152, we established 

that the applicable period for FY 2014 

under the Hospital Readmissions 

Reduction Program is the 3-year period 

from July 1, 2009, to June 30, 2012. That 

is, we determined the excess 

readmissions ratios and calculate the 

payment adjustment (including 

aggregate payments for excess 

readmissions and aggregate payments 

for all discharges) for FY 2014 using 

data from the 3-year time period of July 

1, 2009 through June 30, 2012, as this 

was the most recent available 3-year 

period of data upon which to base these 

calculations (78 FR 50669). 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 40 through 50041), for FY 

2015, consistent with the definition 

specified at § 412.152, we finalized an 

‘‘applicable period’’ for the Hospital 

Readmissions Reduction Program to be 

the 3-year period from July 1, 2010 

through June 30, 2013. That is, we 

determined the excess readmissions 

ratios and the payment adjustment 

(including aggregate payments for 

excess readmissions and aggregate 

payments for all discharges) for FY 2015 

using data from the 3-year time period 

of July 1, 2010 through June 30, 2013. 

In this proposed rule, for FY 2016, 

consistent with the definition specified 

at § 412.152, we are proposing an 

‘‘applicable period’’ for the Hospital 

Readmissions Reduction Program to be 

the 3-year period from July 1, 2011 

through June 30, 2014. In other words, 

we are proposing that the excess 

readmissions ratios and the payment 

adjustment (including aggregate 

payments for excess readmissions and 

aggregate payments for all discharges) 

for FY 2016 using data from the 3-year 

time period of July 1, 2011 through June 

30, 2014. 

8. Proposed Calculation of Aggregate 

Payments for Excess Readmissions for 

FY 2016 

a. Background 

Under the Hospital Readmissions 

Reduction Program the ‘‘base operating 

DRG payment amount’’ defined at 

§ 412.152 is used both to determine the 

readmission adjustment factor that 

accounts for excess readmissions under 

section 1886(q)(3) of the Act and to 

determine which payment amounts will 

be adjusted to account for excess 

readmissions under section 1886(q) of 

the Act. Consistent with section 

1886(q)(2) of the Act, in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53374 

through 53383), under the regulations at 

§ 412.152, we define the ‘‘base operating 

DRG payment amount’’ and specify that 

it does not include adjustments or addon payments for IME, DSH, outliers and 

low-volume hospitals as required by 

section 1886(q)(2) of the Act. 

Furthermore, consistent with section 

1886(q)(2)(B)(i) of the Act, for SCHs and 

for MDHs for FY 2013, the definition of 

‘‘base operating DRG payment amount’’ 

at § 412.152 excludes the difference 

between the hospital’s applicable 

hospital-specific payment rate and the 

Federal payment rate. 

For FY 2015 and subsequent years, for 

purposes of calculating the payment 

adjustment factors and applying the 

payment methodology, in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50041 

through 50048), we finalized our policy 

that the base operating DRG payment 

amount for MDHs includes the 

difference between the hospital-specific 

payment rate and the Federal payment 

rate (as applicable). Section 

1886(q)(3)(B) of the Act specifies the 

ratio used to calculate the adjustment 

factor under the Hospital Readmissions 

Reduction Program. It states that the 

ratio is equal to 1 minus the ratio of— 

(i) the aggregate payments for excess 


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readmissions and (ii) the aggregate 

payments for all discharges. The 

definition of ‘‘aggregate payments for 

excess readmissions’’ and ‘‘aggregate 

payments for all discharges,’’ as well as 

a methodology for calculating the 

numerator of the ratio (aggregate 

payments for excess readmissions) and 

the denominator of the ratio (aggregate 

payments for all discharges) are codified 

at § 412.154(c)(2) of the regulations (77 

FR 53387). 

Section 1886(q)(4) of the Act sets forth 

the definitions of ‘‘aggregate payments 

for excess readmissions’’ and ‘‘aggregate 

payments for all discharges’’ for an 

applicable hospital for the applicable 

period. The term ‘‘aggregate payments 

for excess readmissions’’ is defined in 

section 1886(q)(4)(A) of the Act as for a 

hospital for an applicable period, the 

sum, for applicable conditions of the 

product, for each applicable condition, 

of (i) the base operating DRG payment 

amount for such hospital for such 

applicable period for such condition; (ii) 

the number of admissions for such 

condition for such hospital for such 

applicable period; and (iii) the excess 

readmissions ratio for such hospital for 

such applicable period minus 1. We 

codified this definition of ‘‘aggregate 

payments for excess readmissions’’ 

under the regulations at § 412.152 as the 

product, for each applicable condition, 

of: (1) The base operating DRG payment 

amount for the hospital for the 

applicable period for such condition; (2) 

the number of admissions for such 

condition for the hospital for the 

applicable period; and (3) the excess 

readmissions ratio for the hospital for 

the applicable period minus 1 (77 FR 

53675). 

The excess readmissions ratio is a 

hospital-specific ratio calculated for 

each applicable condition. Specifically, 

section 1886(q)(4)(C) of the Act defines 

the excess readmissions ratio as the 

ratio of ‘‘risk-adjusted readmissions 

based on actual readmissions’’ for an 

applicable hospital for each applicable 

condition, to the ‘‘risk-adjusted 

expected readmissions’’ for the 

applicable hospital for the applicable 

condition. The methodology for the 

calculation of the excess readmissions 

ratio was finalized in the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51673). 

‘‘Aggregate payments for excess 

readmissions’’ is the numerator of the 

ratio used to calculate the adjustment 

factor under the Hospital Readmissions 

Reduction Program (as described in 

further detail later in this section). 

The term ‘‘aggregate payments for all 

discharges’’ is defined at section 

1886(q)(4)(B) of the Act as for a hospital 

for an applicable period, the sum of the 

base operating DRG payment amounts 

for all discharges for all conditions from 

such hospital for such applicable 

period. ‘‘Aggregate payments for all 

discharges’’ is the denominator of the 

ratio used to calculate the adjustment 

factor under the Hospital Readmissions 

Reduction Program. We codified this 

definition of ‘‘aggregate payments for all 

discharges’’ under the regulations at 

§ 412.152 (77 FR 53387). 

We finalized the inclusion of one 

additional applicable condition, 

Patients Readmitted Following Coronary 

Artery Bypass Graft (CABG) Surgery, in 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50033 through 50039) effective 

for FY 2017. We will address the 

inclusion of this additional measure in 

the calculation of the readmissions 

payment adjustment for FY 2017 in the 

FY 2017 rulemaking. 

b. Proposed Calculation of Aggregate 

Payments for Excess Readmissions for 

FY 2016 

As discussed above, when calculating 

the numerator (aggregate payments for 

excess readmissions), we determine the 

base operating DRG payments for the 

applicable period. ‘‘Aggregate payments 

for excess readmissions’’ (the 

numerator) is defined as the sum, for 

applicable conditions of the product, for 

each applicable condition, of (i) the base 

operating DRG payment amount for 

such hospital for such applicable period 

for such condition; (ii) the number of 

admissions for such condition for such 

hospital for such applicable period; and 

(iii) the excess readmissions ratio for 

such hospital for such applicable period 

minus 1. 

When determining the base operating 

DRG payment amount for an individual 

hospital for such applicable period for 

such condition, we use Medicare 

inpatient claims from the MedPAR file 

with discharge dates that are within the 

same applicable period to calculate the 

excess readmissions ratio. We use 

MedPAR claims data as our data source 

for determining aggregate payments for 

excess readmissions and aggregate 

payments for all discharges, as this data 

source is consistent with the claims data 

source used in IPPS rulemaking to 

determine IPPS rates. 

For FY 2016, we are proposing to use 

MedPAR claims with discharge dates 

that are on or after July 1, 2011, and no 

later than June 30, 2014. Under our 

established methodology, we use the 

update of the MedPAR file for each 

Federal fiscal year, which is updated 6 

months after the end of each Federal 

fiscal year within the applicable period, 

as our data source (that is, the March 

updates of the respective Federal fiscal 

year MedPAR files) for the final rules. 

The FY 2011 through FY 2014 

MedPAR data files can be purchased 

from CMS. Use of these files allows the 

public to verify the readmissions 

adjustment factors. Interested 

individuals may order these files 

through the CMS Web site at: http://

www.cms.hhs.gov/LimitedDataSets/ by 

clicking on MedPAR Limited Data Set 

(LDS)-Hospital (National). This Web 

page describes the files and provides 

directions and detailed instructions for 

how to order the data sets. Persons 

placing an order must send the 

following: A Letter of Request, the LDS 

Data Use Agreement and Research 

Protocol (refer to the Web site for further 

instructions), the LDS Form, and a 

check for $3,655 to: 

• If using the U.S. Postal Service: 

Centers for Medicare and Medicaid 

Services, RDDC Account, Accounting 

Division, P.O. Box 7520, Baltimore, MD 

21207–0520. 

• If using express mail: Centers for 

Medicare and Medicaid Services, OFM/ 

Division of Accounting—RDDC, 

Mailstop C#–07–11, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For this FY 2016 proposed rule, we 

are proposing to determine aggregate 

payments for excess readmissions and 

aggregate payments for all discharges 

using data from MedPAR claims with 

discharge dates that are on or after July 

1, 2011, and no later than June 30, 2014. 

However, we note that, for the purpose 

of modeling the proposed FY 2016 

readmissions payment adjustment 

factors for this proposed rule, we use 

excess readmissions ratios for 

applicable hospitals from the FY 2015 

Hospital Readmissions Reduction 

Program applicable period. For the FY 

2016 final rule, applicable hospitals will 

have had the opportunity to review and 

correct data from the proposed FY 2016 

applicable period of July 1, 2011 to June 

30, 2014, before they are made public 

under our policy regarding the reporting 

of hospital-specific information, which 

we discussed in the FY 2013 IPPS/

LTCH PPS final rule (77 FR 53374 

through 53401). 

In this proposed rule, for FY 2016, we 

are proposing to use MedPAR data from 

July 1, 2011 through June 30, 2014. 

Specifically, in this proposed rule, we 

are using the March 2012 update of the 

FY 2011 MedPAR file to identify claims 

within FY 2011 with discharges dates 

that are on or after July 1, 2011, the 

March 2013 update of the FY 2012 

MedPAR file to identify claims within 

FY 2012, the March 2014 update of the 

FY 2013 MedPAR file to identify claims 

within FY 2013, and the December 2014 


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update of the FY 2014 MedPAR file to 

identify claims within FY 2014 with 

discharge dates no later than June 30, 

2014. For the final rule, we are 

proposing to use the same MedPAR files 

as listed above for claims within FY 

2011, FY 2012 and FY 2013. For claims 

within FY 2014, we are proposing to use 

in the final rule the March 2015 update 

of the FY 2014 MedPAR file. 

In order to identify the admissions for 

each condition, to calculate the 

aggregate payments for excess 

readmissions for an individual hospital, 

for FY 2016, we are proposing to 

identify each applicable condition using 

the ICD–9–CM codes used to identify 

applicable conditions to calculate the 

excess readmissions ratios. (Although 

the compliance date for the ICD–10–CM 

and ICD10–PCS code sets is October 1, 

2015 (79 FR 45128 through 45134), 

these proposed policies apply to data 

periods prior to this compliance date.) 

Under our existing policy, we identify 

eligible hospitalizations and 

readmissions of Medicare patients 

discharged from an applicable hospital 

having a principal diagnosis for the 

measured condition in an applicable 

period (76 FR 51669). The discharge 

diagnoses for each applicable condition 

are based on a list of specific ICD–9–CM 

codes for that condition. These codes 

are posted on the QualityNet Web site 

at: http://www.QualityNet.org > 

Hospital-Inpatient > Claims-Based 

Measures > Readmission Measures > 

Measure Methodology. 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50041 

through 50048) for a discussion of how 

we identify the applicable conditions to 

calculate the aggregate payments for 

excess readmissions for FY 2015. For FY 

2016, we are proposing to follow this 

same approach. 

In this proposed rule, for FY 2016, we 

are proposing to continue to apply the 

same exclusions to the claims in the 

MedPAR file as we applied for FY 2015 

for the current applicable conditions. 

For FY 2016, in order to have the same 

types of admissions to calculate 

aggregate payments for excess 

readmissions as is used to calculate the 

excess readmissions ratio, we are 

proposing to identify admissions for the 

AMI, HF, PN, THA/TKA, COPD 

applicable conditions, for the purposes 

of calculating aggregate payments for 

excess readmissions as follows: 

• We would exclude admissions that 

are identified as an applicable condition 

if the patient died in the hospital, as 

identified by the discharge status code 

on the MedPAR claim. 

• We would exclude admissions 

identified as an applicable condition for 

which the patient was transferred to 

another provider that provides acute 

care hospital services (that is, a CAH or 

an IPPS hospital), as identified through 

examination of contiguous stays in 

MedPAR at other hospitals. 

• We would exclude admissions 

identified as an applicable condition for 

patients who are under the age of 65, as 

identified by linking the claim 

information to the information provided 

in the Medicare Enrollment Database. 

• For conditions identified as AMI, 

we would exclude claims that are same 

day discharges, as identified by the 

admission date and discharge date on 

the MedPAR claim. 

• We would exclude admissions for 

patients who did not have Medicare 

Parts A and B FFS enrollment in the 12 

months prior to the index admission, 

based on the information provided in 

the Medicare Enrollment Database. 

• We would exclude admissions for 

patients without at least 30 days postdischarge enrollment in Medicare Parts 

A and B FFS, based on the information 

provided in the Medicare Enrollment 

Database. 

• We would exclude all multiple 

admissions within 30 days of a prior 

index admission’s discharge date, as 

identified in the MedPAR file, 

consistent with how multiple 

admissions within 30 days of an index 

admission are excluded from the 

calculation of the excess readmissions 

ratio. 

These exclusions are consistent with 

our current methodology, which was 

established in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50048). 

Furthermore, we would only identify 

Medicare FFS claims that meet the 

criteria (that is, claims paid for under 

Medicare Part C (Medicare Advantage) 

would not be included in this 

calculation), consistent with the 

methodology to calculate excess 

readmissions ratios based solely on 

admissions and readmissions for 

Medicare FFS patients. Therefore, 

consistent with our established 

methodology, for FY 2016, we would 

exclude admissions for patients enrolled 

in Medicare Advantage as identified in 

the Medicare Enrollment Database. This 

policy is consistent with how 

admissions for Medicare Advantage 

patients are identified in the calculation 

of the excess readmissions ratios under 

our established methodology. The tables 

below list the ICD–9–CM codes we are 

proposing to use to identify each 

applicable condition to calculate the 

aggregate payments for the excess 

readmissions proposal for FY 2016. 

These ICD–9–CM codes also would be 

used to identify the applicable 

conditions to calculate the excess 

readmissions ratios, consistent with our 

established policy (76 FR 51673 through 

51676). 

ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES

ICD–9–CM code Description of code 

480.0 ............................. Pneumonia due to adenovirus. 

480.1 ............................. Pneumonia due to respiratory syncytial virus. 

480.2 ............................. Pneumonia due to parainfluenza virus. 

480.3 ............................. Pneumonia due to SARS-associated coronavirus. 

480.8 ............................. Viral pneumonia: Pneumonia due to other virus not elsewhere classified. 

480.9 ............................. Viral pneumonia unspecified. 

481 ................................ Pneumococcal pneumonia [streptococcus pneumoniae pneumonia]. 

482.0 ............................. Pneumonia due to klebsiella pneumoniae. 

482.1 ............................. Pneumonia due to pseudomonas. 

482.2 ............................. Pneumonia due to hemophilus influenzae [h. influenzae]. 

482.30 ........................... Pneumonia due to streptococcus unspecified. 

482.31 ........................... Pneumonia due to streptococcus group a. 

482.32 ........................... Pneumonia due to streptococcus group b. 

482.39 ........................... Pneumonia due to other streptococcus. 

482.40 ........................... Pneumonia due to staphylococcus unspecified. 

482.41 ........................... Pneumonia due to staphylococcus aureus. 

482.42 ........................... Methicillin Resistant Pneumonia due to Staphylococcus Aureus. 

482.49 ........................... Other staphylococcus pneumonia. 


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ICD–9–CM CODES TO IDENTIFY PNEUMONIA (PN) CASES—Continued 

ICD–9–CM code Description of code 

482.81 ........................... Pneumonia due to anaerobes. 

482.82 ........................... Pneumonia due to escherichia coli [e.coli]. 

482.83 ........................... Pneumonia due to other gram-negative bacteria. 

482.84 ........................... Pneumonia due to legionnaires’ disease. 

482.89 ........................... Pneumonia due to other specified bacteria. 

482.9 ............................. Bacterial pneumonia unspecified. 

483.0 ............................. Pneumonia due to mycoplasma pneumoniae. 

483.1 ............................. Pneumonia due to chlamydia. 

483.8 ............................. Pneumonia due to other specified organism. 

485 ................................ Bronchopneumonia organism unspecified. 

486 ................................ Pneumonia organism unspecified. 

487.0 ............................. Influenza with pneumonia. 

488.11 ........................... Influenza due to identified novel H1N1 influenza virus with pneumonia. 

ICD–9–CM CODES TO IDENTIFY HEART FAILURE (HF) CASES

ICD–9–CM code Code description 

402.01 ........................... Hypertensive heart disease, malignant, with heart failure. 

402.11 ........................... Hypertensive heart disease, benign, with heart failure. 

402.91 ........................... Hypertensive heart disease, unspecified, with heart failure. 

404.01 ........................... Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage I 

through stage IV, or unspecified. 

404.03 ........................... Hypertensive heart and chronic kidney disease, malignant, with heart failure and with chronic kidney disease stage V 

or end stage renal disease. 

404.11 ........................... Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I 

through stage IV, or unspecified. 

404.13 ........................... Hypertensive heart and chronic kidney disease, benign, with heart failure and with chronic kidney disease stage I 

through stage IV, or unspecified failure and chronic kidney disease stage V or end stage renal disease. 

404.91 ........................... Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or 

end stage renal disease heart failure and with chronic kidney disease stage I through stage IV, or unspecified. 

404.93 ........................... Hypertensive heart and chronic kidney disease, unspecified, with heart failure and chronic kidney disease stage V or 

end stage renal disease. 

428.xx ........................... Heart Failure. 

ICD–9–CM CODES TO IDENTIFY ACUTE MYOCARDIAL INFARCTION (AMI) CASES

ICD–9–CM code Description of code 

410.00 ........................... AMI (anterolateral wall)—episode of care unspecified. 

410.01 ........................... AMI (anterolateral wall)—initial episode of care. 

410.10 ........................... AMI (other anterior wall)—episode of care unspecified. 

410.11 ........................... AMI (other anterior wall)—initial episode of care. 

410.20 ........................... AMI (inferolateral wall)—episode of care unspecified. 

410.21 ........................... AMI (inferolateral wall)—initial episode of care. 

410.30 ........................... AMI (inferoposterior wall)—episode of care unspecified. 

410.31 ........................... AMI (inferoposterior wall)—initial episode of care. 

410.40 ........................... AMI (other inferior wall)—episode of care unspecified. 

410.41 ........................... AMI (other inferior wall)—initial episode of care. 

410.50 ........................... AMI (other lateral wall)—episode of care unspecified. 

410.51 ........................... AMI (other lateral wall)—initial episode of care. 

410.60 ........................... AMI (true posterior wall)—episode of care unspecified. 

410.61 ........................... AMI (true posterior wall)—initial episode of care. 

410.70 ........................... AMI (subendocardial)—episode of care unspecified. 

410.71 ........................... AMI (subendocardial)—initial episode of care. 

410.80 ........................... AMI (other specified site)—episode of care unspecified. 

410.81 ........................... AMI (other specified site)—initial episode of care. 

410.90 ........................... AMI (unspecified site)—episode of care unspecified. 

410.91 ........................... AMI (unspecified site)—initial episode of care. 

ICD–9–CM CODES TO IDENTIFY CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD) CASES

ICD–9–CM code Description of code 

491.21 ........................... Obstructive chronic bronchitis; With (acute) exacerbation; acute exacerbation of COPD, decompensated COPD, decompensated COPD with exacerbation. 

491.22 ........................... Obstructive chronic bronchitis; with acute bronchitis. 

491.8 ............................. Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis.. 

491.9 ............................. Unspecified chronic bronchitis. 


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ICD–9–CM CODES TO IDENTIFY CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD) CASES—Continued 

ICD–9–CM code Description of code 

492.8 ............................. Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar, centrilobular, obstructive, panacinar, 

panlobular, unilateral, vesicular. MacLeod’s syndrome; Swyer-James syndrome; unilateral hyperlucent lung. 

493.20 ........................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, unspecified. 

493.21 ........................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with status asthmaticus. 

493.22 ........................... Chronic obstructive asthma; asthma with COPD, chronic asthmatic bronchitis, with (acute) exacerbation. 

496 ................................ Chronic: nonspecific lung disease, obstructive lung disease, obstructive pulmonary disease (COPD) NOS. NOTE: This 

code is not to be used with any code from categories 491–493. 

518.81 * ......................... Other diseases of lung; acute respiratory failure; respiratory failure NOS. 

518.82 * ......................... Other diseases of lung; acute respiratory failure; other pulmonary insufficiency, acute respiratory distress. 

518.84 * ......................... Other diseases of lung; acute respiratory failure; acute and chronic respiratory failure. 

799.1 * ........................... Other ill-defined and unknown causes of morbidity and mortality; respiratory arrest, cardiorespiratory failure. 

* Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22). 

ICD–9–CM CODES TO IDENTIFY TOTAL HIP ARTHROPLASTY/TOTAL KNEE ARTHROPLATY (THA/TKA) CASES

ICD–9–CM code Description of code 

81.51 ............................. Total hip arthroplasty. 

81.54 ............................. Total knee arthroplasty. 

For FY 2016, we are proposing to 

calculate aggregate payments for excess 

readmissions, using MedPAR claims 

from July 1, 2011 to June 30, 2014, to 

identify applicable conditions based on 

the same ICD–9–CM codes used to 

identify the conditions for the 

readmissions measures, and to apply the 

proposed exclusions for the types of 

admissions discussed above. To 

calculate aggregate payments for excess 

readmissions, we are proposing to 

calculate the base operating DRG 

payment amounts for all claims in the 

3-year applicable period for each 

applicable condition (AMI, HF, PN, 

COPD and THA/TKA) based on the 

claims we have identified as described 

above. Once we have calculated the base 

operating DRG amounts for all the 

claims for the five applicable 

conditions, we are proposing to sum the 

base operating DRG payments amounts 

by each condition, resulting in five 

summed amounts, one amount for each 

of the five applicable conditions. We are 

proposing to then multiply the amount 

for each condition by the respective 

excess readmissions ratio minus 1 when 

that excess readmissions ratio is greater 

than 1, which indicates that a hospital 

has performed, with respect to 

readmissions for that applicable 

condition, worse than the average 

hospital with similar patients. Each 

product in this computation represents 

the payments for excess readmissions 

for that condition. We are proposing to 

then sum the resulting products which 

represent a hospital’s proposed 

‘‘aggregate payments for excess 

readmissions’’ (the numerator of the 

ratio). Because this calculation is 

performed separately for each of the five 

conditions, a hospital’s excess 

readmissions ratio must be less than or 

equal to 1 on each measure to aggregate 

payments for excess readmissions (and 

therefore a payment reduction under the 

Hospital Readmissions Reduction 

Program). We note that we are not 

proposing any changes to our existing 

methodology to calculate ‘‘aggregate 

payments for all discharges’’ (the 

denominator of the ratio). 

We are proposing the following 

methodology for FY 2016 as displayed 

in the chart below. 

FORMULAS TO CALCULATE THE READMISSIONS ADJUSTMENT FACTOR FOR FY 2016 

Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI × (Excess Readmissions Ratio for AMI–1)] + 

[sum of base operating DRG payments for HF × (Excess Readmissions Ratio for HF–1)] + [sum of base operating DRG payments for PN × 

(Excess Readmissions Ratio for PN–1)] + [sum of base operating DRG payments for COPD) × (Excess Readmissions Ratio for COPD–1)] + 

[sum of base operating DRG payments for THA/TKA × (Excess Readmissions Ratio for THA/TKA–1)]. 

* We note that if a hospital’s excess readmissions ratio for a condition is less than/equal to 1, there are no aggregate payments for excess readmissions for that condition included in this calculation. 

Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. 

Ratio = 1 ¥ (Aggregate payments for excess readmissions/Aggregate payments for all discharges). 

Proposed Readmissions Adjustment Factor for FY 2016 is the higher of the ratio or 0.9700. 

* Based on claims data from July 1, 2011 to June 30, 2014 for FY 2016. 

We are inviting public comment on 

these proposals. 

9. Proposed Extraordinary Circumstance 

Exception Policy for the Hospital 

Readmissions Reduction Program 

Beginning in FY 2016 and for 

Subsequent Years 

a. Background 

In the FY 2015 IPPS/LTCH PPS 

proposed rule (79 FR 28117), we 

welcomed public comment on whether 

a potential waiver or exception policy 

for hospitals located in areas that 

experience disasters or other 

extraordinary circumstances should be 

implemented, and the policy and 

operational considerations of such an 

extraordinary circumstance exception 

policy for the Hospital Readmissions 


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Reduction Program. In the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

50048), we indicated that we received 

many comments in support of CMS 

establishing a formal extraordinary 

circumstance exception policy under 

the Hospital Readmissions Reduction 

Program. We also previously indicated 

that any specific proposals related to the 

implementation of an extraordinary 

circumstance exception policy would be 

proposed through notice-and-comment 

rulemaking. After further consideration 

of commenters’ support of CMS 

establishing an extraordinary 

circumstance exception policy for the 

Hospital Readmissions Reduction 

Program, we agree with commenters 

that it may be possible for a hospital to 

experience a certain period of time 

during which it is not able to submit all 

of its claims (from which readmission 

measures data are derived) in an 

accurate or timely fashion due to an 

extraordinary circumstance beyond its 

control, and that a policy for taking into 

account such a circumstance should be 

proposed. Section 1886(q)(5)(D) of the 

Act permits the Secretary to determine 

the ‘‘applicable period’’ for 

readmissions data collection, and we 

believe that the statute allows us to 

determine that the period not include 

times when hospitals may encounter 

extraordinary circumstances. 

In developing this proposed 

extraordinary circumstance exception 

policy for the Hospital Readmissions 

Reduction Program beginning in FY 

2016 and for subsequent years, we 

considered a policy and process similar 

to that for the Hospital IQR Program, as 

finalized in the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51651), modified 

in the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50836) (designation of a 

non-CEO hospital contact), and further 

modified in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50277) (amended 

§ 412.140(c)(2) to refer to ‘‘extension or 

exemption’’ instead of the former 

‘‘extension or waiver’’). We also 

considered how best to align an 

extraordinary circumstance exception 

policy for the Hospital Readmissions 

Reduction Program with existing 

extraordinary circumstance exception 

policies for other IPPS quality reporting 

and payment programs, such as the 

Hospital VBP Program, to the extent 

feasible. 

We considered the feasibility and 

implications of excluding data for 

certain readmission measures for a 

limited period of time from the 

calculations for a hospital’s excess 

readmissions ratios for the applicable 

performance period. By minimizing the 

data excluded from the program, the 

proposed policy would enable affected 

hospitals to continue to participate in 

the Hospital Readmissions Reduction 

Program for a given fiscal year if they 

otherwise continue to meet applicable 

measure minimum threshold 

requirements. We believe that this 

approach could help alleviate the 

reporting burden for a hospital that is 

adversely impacted by a natural disaster 

or other extraordinary circumstance 

beyond its control, while enabling the 

hospital to continue to participate in the 

Hospital Readmissions Reduction 

Program. 

b. Requests for an Extraordinary 

Circumstance Exception 

Based upon our prior experience with 

the Hospital IQR Program and the 

Hospital VBP Program, we anticipate 

the need to provide exceptions to only 

a small number of hospitals affected by 

a natural disaster or other extraordinary 

circumstance. During the review of a 

hospital’s request for an extraordinary 

circumstance exception, we would 

maintain the general principle that 

providing high quality of care and 

ensuring patient safety is of paramount 

importance. We do not intend to allow 

a hospital to use this proposed policy 

and the request process to seek 

exclusion from the Hospital 

Readmissions Reduction Program in its 

entirety for a given fiscal year(s) solely 

because of experiencing an 

extraordinary circumstance. Rather, we 

intend to provide relief for a hospital 

whose ability to accurately or timely 

submit all of its claims (from which 

readmission measures data are derived) 

has been negatively impacted as a direct 

result of experiencing a significant 

disaster or other extraordinary 

circumstance beyond the control of the 

hospital. 

We are proposing that the request 

process for an extraordinary 

circumstance exception begin with the 

submission of an extraordinary 

circumstance exception request form by 

a hospital within 90 calendar days of 

the natural disaster or other 

extraordinary circumstance. We believe 

that the 90-calendar day timeframe is an 

appropriate period of time for a hospital 

to determine whether to submit an 

extraordinary circumstance exception 

request. It is also the same length of 

time as the current time period allowed 

under the Hospital VBP Program. Under 

this proposed policy, a hospital would 

be able to request a Hospital 

Readmissions Reduction Program 

extraordinary circumstance exception at 

the same time it may request a similar 

exception under the Hospital IQR 

Program, the Hospital VBP Program, and 

the HAC Reduction Program (if the 

proposed extraordinary circumstance 

exception policy for the HAC Reduction 

Program as described in section IV.G.8. 

of the preamble of this proposed rule is 

adopted). The extraordinary 

circumstance exception request form 

would be made available on the 

QualityNet Web site. 

The following minimum set of 

information would be required to 

submit the request: 

• Hospital CCN; 

• Hospital name; 

• Hospital Chief Executive Officer 

(CEO) and any other designated 

personnel contact information, 

including name, email address, 

telephone number, and mailing address 

(must include a physical address; a post 

office box address is not acceptable); 

• Hospital’s reason for requesting an 

exception, including: 

++ CMS program name (for example, 

the Hospital Readmissions Reduction 

Program, the Hospital VBP Program, or 

the Hospital IQR Program); 

++ The measure(s) and submission 

quarters affected by the extraordinary 

circumstance that the hospital is seeking 

an exception for should be accompanied 

with the specific reasons why the 

exception is being sought; and 

++ How the extraordinary 

circumstance negatively impacted 

performance on the measure(s) for 

which an exception is being sought; 

• Evidence of the impact of the 

extraordinary circumstances, including 

but not limited to, photographs, 

newspaper, and other media articles; 

and 

• The request form must be signed by 

the hospital’s CEO or designated nonCEO contact and submitted to CMS. 

The same set of information is 

currently required under the Hospital 

IQR Program and the Hospital VBP 

Program on the request form from a 

hospital seeking an extraordinary 

circumstance exception with respect to 

these programs. The specific list of 

required information would be subject 

to change from time to time at the 

discretion of CMS. 

Following receipt of the request form, 

CMS would: (1) Provide a written 

acknowledgement of receipt of the 

request using the contact information 

provided in the request form to the CEO 

and any additional designated hospital 

personnel; and (2) provide a formal 

response to the CEO and any additional 

designated hospital personnel using the 

contact information provided in the 

request notifying them of our decision. 

Under the proposed policy, we would 

review each request for an extraordinary 

circumstance exception on a case-byVerDate Sep<11>2014 18:20 Apr 29, 2015 Jkt 235001 PO 00000 Frm 00175 Fmt 4701 Sfmt 4702 E:\FR\FM\30APP2.SGM 30APP2

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case basis at our discretion. To the 

extent feasible, we also would review 

such a request in conjunction with any 

similar requests made under other IPPS 

quality reporting and payment 

programs, such as the Hospital IQR 

Program and the Hospital VBP Program. 

The proposed policy would not 

preclude CMS from granting 

extraordinary circumstance exceptions 

to hospitals that do not request them if 

we determine at our discretion that a 

disaster or other extraordinary 

circumstance has affected an entire 

region or locale. If CMS makes such a 

determination to grant an extraordinary 

circumstance exception to hospitals in 

an affected region or locale, we would 

convey this decision through routine 

communication channels to hospitals, 

vendors, and QIOs, including, but not 

limited to, issuing memos, emails, and 

notices on the QualityNet Web site. This 

provision also would align with the 

Hospital IQR Program’s extraordinary 

circumstances extensions or exemptions 

policy. 

We are inviting public comment on 

this proposal. 

F. Hospital Value-Based Purchasing 

(VBP) Program: Proposed Policy 

Changes for the FY 2018 Program Year 

and Subsequent Years 

1. Background 

a. Statutory Background and Overview 

of Past Program Years 

Section 1886(o) of the Act, as added 

by section 3001(a)(1) of the Affordable 

Care Act, requires the Secretary to 

establish a hospital value-based 

purchasing program (the Hospital VBP 

Program) under which value-based 

incentive payments are made in a fiscal 

year to hospitals that meet performance 

standards established for a performance 

period for such fiscal year. Both the 

performance standards and the 

performance period for a fiscal year are 

to be established by the Secretary. 

For more of the statutory background 

and descriptions of our current policies 

for the Hospital VBP Program, we refer 

readers to the Hospital Inpatient VBP 

Program final rule (76 FR 26490 through 

26547); the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51653 through 51660); 

the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74527 through 

74547); the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53567 through 53614); 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50676 through 50707); the CY 

2014 OPPS/ASC final rule with 

comment period (78 FR 75120 through 

75121); and the FY 2015 IPPS/LTCH 

PPS final rule with comment period (79 

FR 50048 through 50087). 

We have also codified certain 

requirements for the Hospital VBP 

Program at 42 CFR 412.160 through 

412.167. 

b. FY 2016 Program Year Payment 

Details 

Section 1886(o)(7)(B) of the Act 

instructs the Secretary to reduce the 

base operating DRG payment amount for 

a hospital for each discharge in a fiscal 

year by an applicable percent. Under 

section 1886(o)(7)(A) of the Act, the sum 

total of these reductions in a fiscal year 

must equal the total amount available 

for value-based incentive payments for 

all eligible hospitals for the fiscal year, 

as estimated by the Secretary. We 

finalized details on how we would 

implement these provisions in the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53571 through 53573) and refer readers 

to that rule for further details. 

Under section 1886(o)(7)(C)(iv) of the 

Act, the applicable percent for the FY 

2016 program year is 1.75 percent. 

Using the methodology we adopted in 

the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53571 through 53573), we 

estimate that the total amount available 

for value-based incentive payments for 

FY 2016 is $1,489,397,095, based on the 

December 2014 update of the FY 2014 

MedPAR file. We intend to update this 

estimate for the FY 2016 IPPS/LTCH 

PPS final rule, using the March 2015 

update of the FY 2014 MedPAR file. 

As finalized in the FY 2013 IPPS/

LTCH PPS final rule, we will utilize a 

linear exchange function to translate 

this estimated amount available into a 

value-based incentive payment 

percentage for each hospital, based on 

its Total Performance Score (TPS) (77 

FR 53573 through 53576). We will then 

calculate a value-based incentive 

payment adjustment factor that will be 

applied to the base operating DRG 

payment amount for each discharge 

occurring in FY 2016, on a per-claim 

basis. We are publishing proxy valuebased incentive payment adjustment 

factors in Table 16 of this proposed rule 

(which is available via the Internet on 

the CMS Web site). The proxy factors 

are based on the TPSs from the FY 2015 

program year. These FY 2015 

performance scores are the most 

recently available performance scores 

that hospitals have been given the 

opportunity to review and correct. The 

slope of the linear exchange function 

used to calculate those proxy valuebased incentive payment adjustment 

factors is 2.5797595162. This slope, 

along with the estimated amount 

available for value-based incentive 

payments, is also published in Table 16. 

We intend to update this table as 

Table 16A in the final rule (which will 

be available via the Internet on the CMS 

Web site) to reflect changes based on the 

March 2015 update to the FY 2014 

MedPAR file. We also intend to update 

the slope of the linear exchange 

function used to calculate those updated 

proxy value-based incentive payment 

adjustment factors. The updated proxy 

value-based incentive payment 

adjustment factors for FY 2016 will 

continue to be based on historic FY 

2015 Hospital VBP Program TPSs 

because hospitals will not have been 

given the opportunity to review and 

correct their actual TPSs for the FY 2016 

program year until after the FY 2016 

IPPS/LTCH PPS final rule is published. 

After hospitals have been given an 

opportunity to review and correct their 

actual TPSs for FY 2016, we will add 

Table 16B (which will be available via 

the Internet on the CMS Web site) to 

display the actual value-based incentive 

payment adjustment factors, exchange 

function slope, and estimated amount 

available for the FY 2016 program year. 

We expect that Table 16B will be posted 

on the CMS Web site in October 2015. 

2. Proposed Retention, Removal, 

Expansion, and Updating of Quality 

Measures for the FY 2018 Program Year 

a. Retention of Previously Adopted 

Hospital VBP Program Measures for the 

FY 2018 Program Year 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53592), we finalized our 

proposal to readopt measures from the 

prior program year for each successive 

program year, unless proposed and 

finalized otherwise (for example, if we 

propose and finalize the removal of a 

measure). We stated our belief that this 

policy would facilitate measure 

adoption for the Hospital VBP Program 

for future program years, as well as align 

the Hospital VBP Program with the 

Hospital IQR Program (77 FR 53592). 

We are not proposing to change our 

current policy of readopting measures 

from the prior program year for each 

successive program year. 

b. Proposed Removal of Two Measures 

One consideration in determining 

whether a measure should be retained 

or removed from the program is based 

on an analysis of whether the measure 

is ‘‘topped-out.’’ We have adopted two 

criteria for determining the ‘‘toppedout’’ status of Hospital VBP measures: 

• Statistically indistinguishable 

performance at the 75th and 90th 

percentiles; and 

• Truncated coefficient of variation 

≤0.10. 


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In this proposed rule, we are 

proposing to remove the IMM–2 

Influenza Immunization and AMI–7a 

Fibrinolytic Therapy Received within 

30 Minutes of Hospital Arrival 

measures, effective for the FY 2018 

program year. We believe that removing 

these measures will continue to ensure 

that we make valid statistical 

comparisons through our finalized 

scoring methodology, while reducing 

the reporting burden on participating 

hospitals. 

(1) Proposed Removal of IMM–2 

Influenza Immunization Measure 

Based on our evaluation of the most 

recently available data, we believe that 

IMM–2 is ‘‘topped-out.’’ As we have 

discussed in prior rulemaking, 

measuring hospital performance on 

‘‘topped-out’’ measures will have no 

meaningful effect on a hospital’s TPS, 

given that performance on ‘‘topped-out’’ 

measures is generally so high and 

unvarying that meaningful distinctions 

and improvements in performance can 

no longer be made. 

As discussed further in section 

VIII.A.3.b. of the preamble of this 

proposed rule, we believe that this 

measure should continue to be part of 

the Hospital IQR Program measure set 

because it is the only measure that 

addresses the Best Practices to Enable 

Healthy Living goal in the CMS Quality 

Strategy and priority of the same name 

in the National Quality Strategy. 

We are inviting public comment on 

this proposal. 

(2) Proposed Removal of AMI–7a 

Fibrinolytic Therapy Received Within 

30 Minutes of Hospital Arrival Measure 

Our evaluation of the most recently 

available data shows that AMI–7a is not 

widely reported by hospitals, and that 

many hospitals have less than the 

minimum number of cases required for 

reporting because most acute 

myocardial infarction patients receive 

percutaneous coronary intervention 

instead of fibrinolytic therapy. We are 

proposing to remove AMI–7a because 

collection of the measure data is 

burdensome to hospitals and measure 

data are infrequently reported. 

Therefore, we do not believe that its 

continued adoption under the Hospital 

VBP Program will advance our quality 

improvement goals. As discussed in 

section VIII.A.3.b. of the preamble of 

this proposed rule, we also are 

proposing to remove this measure under 

the Hospital IQR Program. 

We are inviting public comment on 

this proposal. 

c. Proposed New Measure for the FY 

2018 Program Year: 3-Item Care 

Transition Measure (CTM–3) (NQF 

#0228) 

We consider measures for adoption 

based on the statutory requirements, 

including specification under the 

Hospital IQR Program, posting dates on 

the Hospital Compare Web site, and our 

priorities for quality improvement as 

outlined in the CMS Quality Strategy, 

available at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

QualityInitiativesGenInfo/Downloads/

CMS-Quality-Strategy.pdf. 

The 3-Item Care Transition Measure 

(CTM–3) is an NQF-endorsed measure. 

We adopted this measure in the 

Hospital IQR Program in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53513 

through 53516). Initial measure data 

were posted on Hospital Compare in 

December 2014 and the full measure 

specifications are available at: http://

www.caretransitions.org/documents/

CTM3Specs0807.pdf. Specifications for 

the Care Transition Measure as used in 

the HCAHPS Survey can be found in the 

current HCAHPS Quality Assurance 

Guidelines, http://

www.hcahpsonline.org/

qaguidelines.aspx. 

The CTM–3 measure adds three 

questions to the HCAHPS Survey, as 

follows: 

• During this hospital stay, staff took 

my preferences and those of my 

family or caregiver into account in 

deciding what my health care needs 

would be when I left. 

b Strongly disagree 

b Disagree 

b Agree 

b Strongly agree 

• When I left the hospital, I had a good 

understanding of the things I was 

responsible for in managing my 

health. 

b Strongly disagree 

b Disagree 

b Agree 

b Strongly agree 

• When I left the hospital, I clearly 

understood the purpose for taking 

each of my medications. 

b Strongly disagree 

b Disagree 

b Agree 

b Strongly agree 

b I was not given any medication 

when I left the hospital 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50065 through 50066), we 

stated that we were considering 

proposing to add the CTM–3 measure 

from the HCAHPS Survey to the Patient 

and Caregiver Centered Experience of 

Care/Care Coordination (PCCEC/CC) 

domain of the FY 2018 Hospital VBP 

Program, and we sought public 

comments on this topic. We specifically 

sought public comments on how the 

new CTM–3 dimension should be 

included in the scoring methodology 

that we have adopted for the PCCEC/CC 

domain. 

Based on other public comments last 

year, we agreed to release additional 

information about the validity, 

reliability, and statistical properties of 

the CTM–3 measure when we proposed 

the measure (79 FR 50066). We made 

this information publicly available in 

2014 through the NQF reendorsement 

process of the HCAHPS Survey (NQF 

#0166), available at: http://www.quality

forum.org/ProjectMeasures.aspx?

projectID=73867. 

We note that the MAP supported the 

inclusion of the CTM–3 measure in the 

Hospital VBP Program in its MAP PreRulemaking Report: 2013 

Recommendations on Measures Under 

Consideration by HHS, available at: 

http://www.qualityforum.org/

Publications/2013/02/MAP_PreRulemaking_Report_-_February_

2013.aspx. The MAP noted that the 

addition of the CTM–3 measure will fill 

a gap in measuring care transitions. 

We are proposing this measure for the 

Hospital VBP Program based on the 

MAP recommendation, our adoption of 

the measure in the Hospital IQR 

Program and our posting of measure 

data on Hospital Compare for at least 

one year before the beginning of the 

performance period for that measure. 

We believe that the proposed addition 

of the CTM–3 measure to the Hospital 

VBP Program meets the statutory 

requirements for inclusion in the FY 

2018 program year. Finally, we also 

believe that this measure, in 

conjunction with the HCAHPS survey, 

assesses an important component of 

quality in the acute care inpatient 

hospital setting. However, we 

emphasize that HCAHPS scores are 

designed and intended for use at the 

hospital level. We do not endorse the 

use of HCAHPS scores for comparisons 

within hospitals, such as comparison of 

HCAHPS scores associated with a 

particular ward, floor, provider, or 

nursing staff. Further, the pain domain 

questions are intended to evaluate 

patients’ experience of their pain 

management. HCAHPS pain domain 

results are not designed to judge, or 

compare, appropriate versus 

inappropriate provider prescribing 

behavior. 

We are inviting public comment on 

this proposal. 


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54Centers for Medicare & Medicaid Services. 

(2013). Table I.3—Medicare Enrollment/

Demographics. Available at: http://www.cms.gov/

Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/CMS-Statistics-ReferenceBooklet/Downloads/CMS_Stats_2013_final.pdf. 

55Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, 

D., & Meyers, J. (2009). Neonatal and maternal 

outcomes associated with elective delivery. 

[Electronic Version]. Am J Obstet Gynecol. 

200:156.e1–156.e4. 56 Glantz, J. (Apr. 2005). Elective induction vs. 

spontaneous labor associations and outcomes. 

[Electronic Version]. J Reprod Med. 50(4):235–40. 

Available at: http://www.researchgate.net/

publication/7826004_Elective_induction_vs._

spontaneous_labor_associations_and_outcomes. 

57MAP Families of Measures: Safety, Care 

Coordination, Cardiovascular Conditions, Diabetes 

Final Report, October 2012, p. 46. 

58Available at: http://www.cdc.gov/HAI/

surveillance/QA_stateSummary.html. 

59Available at: http://www.cdc.gov/HAI/

surveillance/QA_stateSummary.html. 

60Available at: http://www.cdc.gov/nhsn/PDFs/

Newsletters/NHSN_NL_OCT_2010SE_final.pdf. 

61Available at: http://www.cdc.gov/nhsn/PDFs/

Newsletters/NHSN_NL_OCT_2010SE_final.pdf. 

62Available at: http://www.cdc.gov/HAI/

surveillance/QA_stateSummary.html#b6. 

63Available at: http://www.cdc.gov/HAI/

surveillance/QA_stateSummary.html#b6. 

64Available at: http://www.cdc.gov/HAI/

surveillance/QA_stateSummary.html#b6. 

d. Proposed Removal of Clinical Care— 

Process Subdomain for the FY 2018 

Program Year and Subsequent Years 

We have previously adopted three 

measures for the Clinical Care—Process 

subdomain for the FY 2017 Hospital 

VBP Program (for example, 79 FR 50062 

(Table on Previously Adopted and New 

Measures for the FY 2017 Hospital VBP 

Program)). However, as discussed above, 

we are proposing to remove the AMI–7a 

and IMM–2 measures from the Hospital 

VBP Program, and we are not proposing 

to adopt any additional measures for the 

Clinical Care—Process subdomain. If 

the proposals above are finalized, only 

one measure, PC–01 Elective Delivery, 

which measures the incidence of 

elective births prior to 39 weeks 

gestation, would remain in the Clinical 

Care—Process subdomain for the FY 

2018 program year. For the reasons 

outlined below, and if we finalize the 

removal of the IMM–2 and AMI–7a 

measures, we are proposing to move 

PC–01 to the Safety domain and to 

remove the Clinical Care—Process 

subdomain beginning with the FY 2018 

program year. 

As we have stated over the past 

several years (for example, 79 FR 

50084), we desire the Hospital VBP 

Program to be as inclusive as possible 

while maintaining and ensuring the 

reliability of the domains. We believe 

that the PC–01 Elective Delivery 

measure continues to be appropriate for 

the Hospital VBP Program because, in 

2012, nearly one million Medicare 

beneficiaries were women age 45 and 

under.54 Further, in 2011, Medicare 

paid for roughly 14,000 births (79 FR 

50060). However, not all hospitals 

provide maternity services, which 

would leave these hospitals with no 

Clinical Care-Process subdomain 

measures to report in FY 2018 if PC–01 

remains the only measure in that 

subdomain. 

We believe that the PC–01 Elective 

Delivery measure, currently in the 

Clinical Care—Process subdomain, can 

appropriately be recategorized as a 

Safety domain measure. PC–01 

addresses a process designed to reduce 

risk to both the neonate and the mother, 

thereby making care safer. Guidelines 

from the American College of 

Obstetricians and Gynecologists and the 

American Academy of Pediatrics state 

elective deliveries should not be 

performed at <39 weeks gestation unless 

medically indicated.55 Evidence has 

shown that early-term deliveries result 

in significant short-term neonatal 

mortality and result in more cesarean 

deliveries, and longer maternal length of 

stay.56 Furthermore, the MAP Hospital 

Workgroup has included PC–01 as an 

‘‘obstetrical adverse event’’ measure in 

its Safety family of measures.57 As we 

continue to align our measure 

categorizations more closely with the 

CMS Quality Strategy, we are proposing 

to recategorize PC–01 as a Safety 

measure in the Safety domain, and for 

the reasons discussed above, to remove 

the Clinical Care—Process subdomain 

beginning with the FY 2018 program 

year. 

Finally, if we finalize our proposal to 

remove the Clinical Care—Process 

subdomain, we are proposing to rename 

the Clinical Care—Outcomes subdomain 

as simply the Clinical Care domain. We 

are also proposing to reweight the 

domains to reflect our proposals, which 

we detail in section IV.G.7.a. of the 

preamble of this proposed rule. 

We are inviting public comments on 

these proposals. 

e. NHSN Measures Standard Population 

Data 

The NHSN measures are calculated by 

CDC, and currently include the CAUTI, 

CLABSI, MRSA bacteremia, CDI, and 

Colon and Abdominal Hysterectomy SSI 

measures in the FY 2017 program year 

and subsequent program years. They 

measure the occurrence of these HAIs in 

hospitals participating in the Hospital 

VBP Program. In order to calculate the 

NHSN measures for use in both the 

Hospital IQR Program and the Hospital 

VBP Program, CDC must go through 

several steps. First, CDC determines 

each NHSN measure’s number of 

predicted infections.58 CDC determines 

the number of predicted infections 

using both specific patient care location 

characteristics (for example, number of 

days in which a patient in an ICU has 

a central line) and infection rates that 

occurred among a standard population 

(sometimes referred to by CDC as 

‘‘national baseline’’ but referred to here 

as ‘‘standard population data’’).59

Finally, for each NHSN measure, CDC 

calculates the Standardized Infection 

Ratio (SIR) by comparing a hospital’s 

observed number of HAIs with the 

number of HAIs predicted for the 

hospital, adjusting for several risk 

factors.60 For more information about 

the way NHSN measures are calculated, 

we refer readers to QualityNet’s Web 

page on HAI measures, which may be 

found at: https://www.qualitynet.org/

dcs/ContentServer?c=Page&pagename=

QnetPublic%2FPage%2FQnetTier2&

cid=1228760487021. 

As part of routine measure 

maintenance, CDC is updating the 

‘‘standard population data’’ to ensure 

the NHSN measures’ number of 

predicted infections reflect the current 

state of HAIs in the United States.61

Currently, CDC calculates the ‘‘standard 

population data’’ for the CAUTI 

measure based on data it collected in CY 

2009.62 CDC calculates the ‘‘standard 

population data’’ for the CLABSI and 

Colon and Abdominal Hysterectomy SSI 

measures based on data it collected in 

2006 to 2008.63 CDC calculates the 

‘‘standard population data’’ for the 

MRSA bacteremia and CDI measures 

based on data it collected in 2010 to 

2011.64 Beginning in 2015, CDC will 

collect data in order to update the 

standard population data for all of these 

NHSN measures (the CY 2015 standard 

population data for HAI measures will 

hereinafter be referred to as ‘‘new 

standard population data’’). 

Because the Hospital VBP Program 

calculates improvement points using 

comparisons between data collected 

from hospitals in a baseline period and 

data collected in a performance period, 

the Hospital VBP Program must treat 

CDC’s standard population data update 

differently than other quality programs. 

We have determined that we cannot 

equally compare CDC’s ‘‘new standard 

population data’’ to the ‘‘current 

standard population data’’ in order to 

calculate improvement points. If we do 

not address the CDC’s measure update, 

we will be unable to compare the 

baseline and performance periods for 

NHSN measures in the FY 2017 and FY 

2018 program years. To address the 


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problem, we intend to use the ‘‘current 

standard population data’’ to calculate 

performance standards and calculate 

and publicly report measure scores until 

the FY 2019 program year, as depicted 

in the table below. For the FY 2019 

program year and subsequent years, the 

Hospital VBP Program will use the 

‘‘new standard population data’’ to 

calculate performance standards and 

calculate and publicly report measure 

scores. 

CDC’S STANDARD POPULATION DATA IN THE HOSPITAL VBP PROGRAM

FY 2017 

program year * 

FY 2018 

program year * 

FY 2019 

program year ** 

FY 2020 

program year ** 

NHSN Measures Baseline 

Periods.

Current standard population data.Current standard population data.New standard population 

data.

New standard population 

data. 

NHSN Measures Performance Periods.Current standard population data.Current standard population data.New standard population 

data.

New standard population 

data. 

* CDC will use ‘‘current standard population data’’ to calculate measure data that we will translate into scores on the measures. 

** CDC will use ‘‘new standard population data’’ (CY 2015) to calculate measure data that we will translate into scores on the measures. 

For a discussion addressing the ‘‘new 

standard population data’’ in the 

Hospital IQR Program, we refer readers 

to section VIII.A.4.b. of the preamble of 

this proposed rule. 

f. Summary of Previously Adopted and 

Newly Proposed Measures for the FY 

2018 Program Year 

In summary, for the FY 2018 program, 

we are proposing the following measure 

set: 

FY 2018 PREVIOUSLY ADOPTED AND NEWLY PROPOSED MEASURES

Patient and Caregiver-Centered Experience of Care/Care Coordination Domain 

HCAHPS ....................... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. 

CTM–3 * ........................ 3-Item Care Transitions Measure. 

Clinical Care Domain 

MORT–30–AMI ............. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction Hospitalization. 

MORT–30–HF .............. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure Hospitalization. 

MORT–30–PN .............. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization. 

Safety Domain 

CAUTI ........................... National Healthcare Safety Network Catheter-Associated Urinary Tract Infection Outcome Measure.

CLABSI ......................... National Healthcare Safety Network Central Line-Associated Bloodstream Infection Outcome Measure. 

Colon and Abdominal 

Hysterectomy SSI.

Centers for Disease Control and Prevention Harmonized Procedure Specific Surgical Site Infection Outcome Measure: 

• Colon 

• Abdominal Hysterectomy. 

MRSA bacteremia ........ National Healthcare Safety Network Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 

Bacteremia Outcome Measure. 

CDI ................................ National Healthcare Safety Network Facility-Wide Inpatient Hospital-Onset Clostridium difficile Infection Outcome 

Measure. 

PSI–90 .......................... Patient Safety for Selected Indicators (Composite). 

PC–01 ** ....................... Elective Delivery. 

Efficiency and Cost Reduction Domain 

MSPB–1 ........................ Payment-Standardized Medicare Spending Per Beneficiary 

* Proposed new measure. 

** Proposed to be moved from the Clinical Care—Process subdomain to the Safety domain. 

3. Previously Adopted and Newly 

Proposed Measures for the FY 2019, FY 

2021, and Subsequent Program Years 

Due to the time necessary to adopt 

measures, we often adopt policies for 

the Hospital VBP Program well in 

advance of the program year for which 

they will be applicable (for example, 76 

FR 26490 through 26547; 76 FR 51653 

through 51660; 76 FR 74527 through 

74547; 77 FR 53567 through 53614; 78 

FR 50676 through 50707; 78 FR 75120 

through 75121; 79 FR 50048 through 

50087). Below, we are signaling our 

intent to include additional data in 

certain NHSN measures beginning with 

the FY 2019 program year, proposing to 

adopt a new measure beginning with the 

FY 2021 program year, and 

summarizing all previously adopted and 

newly proposed measures. 

a. Intent To Propose in Future 

Rulemaking To Include Selected Ward 

(Non-Intensive Care Unit (ICU)) 

Locations in Certain NHSN Measures 

Beginning With the FY 2019 Program 

Year 

The Hospital VBP Program uses adult, 

pediatric, and neonatal intensive care 

unit (ICU) data to calculate performance 

standards and measure scores for the 

CAUTI and CLABSI measures for the FY 

2017 and FY 2018 program years (79 FY 


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65Hoyert DL, Xu JQ. Deaths: preliminary data for 

2011. Natl Vital Stat Rep. 2012;61(6):1–65. 

Hyattsville, MD: National Center for Health 

Statistics.2012. Available at: http://

www.birthbythenumbers.org/wp-content/uploads/

2012/12/prelim-deaths-2011.pdf. 

66National Heart L, and Blood Institute, The 

Morbidity & Mortality: Chart Book on 

Cardiovascular, Lung and Blood Diseases. 2009; 

Available at: http://www.nhlbi.nih.gov/resources/

docs/2009_ChartBook.pdf. 

67The Centers for Disease Control and 

Prevention. National Center for Health Statistics 

Chronic Lower Respiratory Disease. FastStats 2010; 

Available at: http://www.cdc.gov/nchs/fastats/

copd.htm. 

68Agency for Healthcare Research and Quality. 

Healthcare Cost and Utilization Project Statistics on 

Hospitals Stays. 2009; Available at: http://

hcupnet.ahrq.gov/. 

69Andrews RM. The National Hospital Bill: The 

Most Expensive Conditions by Payer, 2006. 

Rockville: Agency for Healthcare Research and 

Quality; 2008. 

70September 2014 Medicare Hospital Quality 

Chartbook Performance Report on Outcome 

Measures. Available at: http://www.cms.gov/

Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/

Medicare-Hospital-Quality-Chartbook-2014.pdf. 

71National Quality Forum ‘‘Spreadsheet of MAP 

2015 Final Recommendations’’ available at: http:// 

www.qualityforum.org/map/ and ‘‘Process and 

Approach for MAP Pre-Rulemaking Deliberations 

2015’’ found at http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx. 

50061). In the FY 2014 IPPS/LTCH PPS 

proposed rule, we proposed under the 

Hospital IQR Program to expand the 

collection of CAUTI and CLABSI 

measures to include several selected 

ward (non-ICU) locations beginning 

with events occurring on or after 

January 1, 2014 (78 FR 27684). In the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50787), after consideration of the public 

comments received, we deferred the 

implementation date of the CAUTI and 

CLABSI measure expansion to selected 

ward (non-ICU) settings for the Hospital 

IQR Program from January 1, 2014 to 

January 1, 2015 (78 FR 50787). Selected 

ward (non-ICU) locations are defined as 

adult or pediatric medical, surgical, and 

medical/surgical wards (79 FY 50061; 

78 FR 50787). 

In the FY 2015 IPPS/LTCH PPS final 

rule, we signaled our intent to consider 

using data from selected ward (non-ICU) 

locations for the Hospital VBP Program, 

beginning in the FY 2019 program year 

for purposes of calculating performance 

standards for the CAUTI and CLABSI 

measures (79 FR 50061). We intend to 

propose to include the selected ward 

(non-ICU) locations in the CAUTI and 

CLABSI measures beginning with the 

FY 2019 program year in future 

rulemaking. We intend to propose to 

adopt a baseline period of January 1, 

2015 through December 31, 2015, and a 

performance period of January 1, 2017 

through December 31, 2017, for the 

CAUTI and CLABSI measures. This 

expansion of the CAUTI and CLABSI 

measures would be consistent with the 

NQF reendorsement update to these 

measures, which allows application of 

the measures beyond ICUs (78 FR 

50787). We believe this expansion of the 

measures will allow hospitals that do 

not have ICU locations to use the tools 

and resources of the NHSN for quality 

improvement and public reporting 

efforts (78 FR 50787). 

We are inviting public comment on 

this plan to accommodate these 

measures’ expansions in the Hospital 

VBP Program future rulemaking. 

b. Proposed New Measure for the FY 

2021 Program Year: Hospital 30-Day, 

All-Cause, Risk-Standardized Mortality 

Rate Following Chronic Obstructive 

Pulmonary Disease (COPD) 

Hospitalization (NQF #1893) 

Hospital 30-Day, All-Cause, RSMR 

following COPD Hospitalization (NQF 

#1893) (MORT–30–COPD) is a riskadjusted, NQF-endorsed mortality 

measure monitoring mortality rates 

following COPD hospitalizations. We 

adopted this measure in the Hospital 

IQR Program in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50792). Initial 

measure data were posted on Hospital 

Compare in December 2014 and the full 

measure specifications are available at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

Chronic lower respiratory disease 

(including COPD) is the third leading 

cause of death in the United States.65

Between 1998 and 2008, the number of 

patients hospitalized annually for acute 

exacerbations of COPD increased by 

approximately 18 percent.66 67 68

Moreover, COPD is one of the top 20 

conditions contributing to Medicare 

costs.69 The median 30-day RSMR 

following admissions for COPD between 

July 2010 and June 2013 was 7.8 percent 

with variation in mortality rates ranging 

from 5.5 percent to 12.4 percent across 

over 2,700 hospitals.70

The MAP supported the inclusion of 

the MORT–30–COPD measure in the 

Hospital VBP Program as detailed in the 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations.’’ 71 The MAP noted 

that the addition of the MORT–30– 

COPD measure would be appropriate as 

30-day mortality rate measures for AMI, 

HF, and PN are already part of the 

Hospital VBP Program measure set. 

We are proposing this measure for the 

Hospital VBP Program based on the 

MAP recommendation, our adoption of 

the measure in the Hospital IQR 

Program and our posting of measure 

data on Hospital Compare for at least 1 

year prior to the start of the performance 

period. In addition, the MORT–30– 

COPD measure is appropriate for the 

Hospital VBP Program because it 

addresses a high volume, high cost 

condition, and chronic lower respiratory 

disease (including COPD) is the third 

leading cause of mortality in the United 

States. The measure aligns with the 

CMS Quality Strategy Goal of Effective 

Prevention and Treatment. Based on the 

continued high risk of mortality after 

COPD hospitalizations, we are 

proposing to add it to the Clinical Care 

domain for the FY 2021 Hospital VBP 

Program. 

We are inviting public comment on 

this proposal. 

c. Summary of Previously Adopted and 

Newly Proposed Measures for the FY 

2019 and FY 2021 and Subsequent 

Program Years 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50063), we finalized our 

proposal to adopt the Hospital-Level 

Risk-Standardized Complication Rate 

Following Elective Primary THA/TKA 

measures for the FY 2019 program year 

and subsequent years. In the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50063 

through 50065), we also finalized our 

proposal to adopt the PSI–90 measure 

for the FY 2019 program year and 

subsequent years. 

FY 2019 PREVIOUSLY ADOPTED

MEASURES

Clinical Care Domain 

THA/TKA ........ Hospital-Level Risk-Standardized Complication Rate 

Following Elective Primary 

Total Hip Arthroplasty/

Total Knee Arthroplasty. 

FY 2019 PREVIOUSLY ADOPTED

MEASURES

Safety Domain 

PSI–90 ........... Patient Safety For Selected 

Indicators (Composite). 

In this proposed rule, we are 

proposing to adopt the MORT–30– 

COPD measure for the FY 2021 program 

year and subsequent years. 


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FY 2021 NEWLY PROPOSED MEASURE

Clinical Care Domain 

MORT–30– 

COPD.

Hospital 30-Day, All-Cause, 

Risk-Standardized Mortality Rate Following 

Chronic Obstructive Pulmonary Disease Hospitalization. 

4. Possible Measure Topics for Future 

Program Years 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50066 through 50070), we 

sought comment on measures that could 

potentially be used to expand the 

Efficiency and Cost Reduction domain 

in the future. We are again seeking 

comments on this issue. We are 

interested in expanding the Efficiency 

and Cost Reduction domain to include 

a more robust measure set, which may 

include measures that supplement the 

MSPB measure with more condition 

and/or treatment specific episode 

measures. We encourage comment on 

efficiency and cost reduction measures 

already included in the Hospital IQR 

Program as well as measures we are 

proposing in section VIII.A.7. of the 

preamble of this proposed rule for 

inclusion in the Hospital IQR Program 

beginning with the FY 2018 payment 

determination. 

5. Previously Adopted and Newly 

Proposed Baseline and Performance 

Periods for the FY 2018 Program Year 

a. Background 

Section 1886(o)(4) of the Act requires 

the Secretary to establish a performance 

period for the Hospital VBP Program 

that begins and ends prior to the 

beginning of such fiscal year. We refer 

readers to the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50048 through 50087) 

for the baseline and performance 

periods for the Clinical Care—Process, 

PCCEC/CC, Clinical Care—Outcomes, 

and Efficiency and Cost Reduction 

domains that we have adopted for the 

FY 2017 program year. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50692 through 50694, we 

adopted baseline and performance 

periods for the 30-day mortality 

measures for FY 2017, FY 2018, and FY 

2019, and for the PSI–90 measure for FY 

2017 and FY 2018 (78 FR 50692 through 

50694, 50698 through 50699). 

b. Proposed Baseline and Performance 

Periods for the Patient and CaregiverCentered Experience of Care/Care 

Coordination Domain for the FY 2018 

Program Year 

Since the FY 2015 program year, we 

have adopted a 12-month baseline 

period and 12-month performance 

period for measures in the PCCEC/CC 

domain (77 FR 53598; 78 FR 50692; 79 

FR 50072). We continue to believe that 

a 12-month performance period for the 

HCAHPS Survey and proposed CTM–3 

measure provides us sufficient data on 

which to score hospital performance, 

which is an important goal for both 

CMS and stakeholders. Therefore, for 

the FY 2018 program year, we are 

proposing to adopt a 12-month 

performance period of January 1, 2016 

through December 31, 2016 for the 

PCCEC/CC domain. We also are 

proposing to adopt a corresponding 12- 

month baseline period of January 1, 

2014 through December 31, 2014 for 

purposes of calculating improvement 

points and calculating performance 

standards. 

We are inviting public comment on 

these proposals. 

c. Proposed Baseline and Performance 

Periods for NHSN Measures and PC–01 

in the Safety Domain for the FY 2018 

Program Year 

Since the FY 2016 program year, we 

have adopted a 12-month baseline 

period and 12-month performance 

period for NHSN measures (78 FR 

75121; 79 FR 50071). In addition, we 

adopted the PC–01 measure for the FY 

2017 program year with a 12-month 

baseline period and 12-month 

performance period (79 FR 50072). We 

continue to believe that a 12-month 

performance period provides us with 

sufficient data on which to score 

hospital performance on the NHSN 

measures, as well as the PC–01 measure, 

in the Safety domain. We also note that 

12-month baseline and performance 

periods are consistent with the reporting 

periods used for these measures under 

the Hospital IQR Program. Therefore, for 

the FY 2018 program year, we are 

proposing to adopt a performance 

period of January 1, 2016 through 

December 31, 2016 for the NHSN 

measures and the PC–01 measure in the 

Safety domain. We also are proposing to 

adopt a corresponding baseline period 

of January 1, 2014 through December 31, 

2014 for purposes of calculating 

improvement points and calculating 

performance standards. 

We are inviting public comment on 

these proposals. 

d. Proposed Baseline and Performance 

Periods for the Efficiency and Cost 

Reduction Domain for the FY 2018 

Program Year 

Since the FY 2016 program year, we 

have adopted a 12-month baseline 

period and 12-month performance 

period for the MSPB–1 measure in the 

Efficiency and Cost Reduction domain 

(79 FR 50072; 78 FR 50692). These 

baseline and performance periods 

enable us to collect sufficient measure 

data, while allowing time to calculate 

and incorporate MSPB–1 measure data 

into the Hospital VBP Program scores in 

a timely manner. Therefore, for the FY 

2018 program year, we are proposing to 

adopt a 12-month performance period of 

January 1, 2016 through December 31, 

2016 for the MSPB–1 measure in the 

Efficiency and Cost Reduction domain. 

We also are proposing to adopt a 

corresponding baseline period of 

January 1, 2014 through December 31, 

2014. We note that these proposed 

baseline and performance periods align 

with the baseline and performance 

periods for the PCCEC/CC domain and 

all measures in the Safety domain with 

the exception of PSI–90. 

We are inviting public comments on 

these proposals. 

e. Summary of Previously Adopted and 

Newly Proposed Baseline and 

Performance Periods for the FY 2018 

Program Year 

The table below summarizes the 

proposed baseline and performance 

periods for the FY 2018 program year 

(with previously adopted baseline and 

performance periods for the mortality 

and PSI composite (PSI–90) measures 

noted). We note that we have proposed 

above to remove the Clinical Care— 

Process subdomain from the Hospital 

VBP Program beginning with the FY 

2018 program year. We note further that 

these baseline and performance periods 

would continue to align with the 

PCCEC/CC domain and the Efficiency 

and Cost Reduction domain, as well as 

the periods proposed for certain 

measures in the Safety domain. 

PREVIOUSLY ADOPTED AND PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2018 PROGRAM YEAR

Domain Baseline period Performance period 

PCCEC/CC: 

• HCAHPS Survey ................................................. January 1, 2014–December 31, 2014 ....... January 1, 2016–December 31, 2016. 

• CTM–3.


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PREVIOUSLY ADOPTED AND PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2018 PROGRAM YEAR— 

Continued 

Domain Baseline period Performance period 

Clinical Care: 

Mortality (MORT–30–AMI, MORT–30–HF, MORT– 

30–PN) *.

October 1, 2009–June 30, 2012 ................ October 1, 2013–June 30, 2016. 

Safety: 

• PSI–90 * .............................................................. • July 1, 2010–June 30, 2012 ................... • July 1, 2014–June 30, 2016. 

• PC–01 and NHSN measures (CAUTI, CLABSI, 

SSI, CDI, MRSA).

• January 1, 2014–December 31, 2014 .... • January 1, 2016–December 31, 2016. 

Efficiency and Cost Reduction: 

MSPB–1 ................................................................. January 1, 2014–December 31, 2014 ....... January 1, 2016–December 31, 2016. 

* Previously adopted baseline and performance periods. 

6. Previously Adopted and Newly 

Proposed Baseline and Performance 

Periods for Future Program Years 

a. Previously Adopted Baseline and 

Performance Periods for the FY 2019 

Program Year 

The table below summarizes the 

previously adopted baseline and 

performance periods for the Clinical 

Care domain and PSI–90 measures for 

the FY 2019 program year. 

PREVIOUSLY ADOPTED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2019 PROGRAM YEAR

Domain Baseline period Performance period 

Clinical Care: 

Mortality (MORT–30–AMI, MORT–30–HF, MORT– 

30–PN).

• July 1, 2009–June 30, 2012 ................... • July 1, 2014–June 30, 2017. 

• THA/TKA ............................................................. • July 1, 2010–June 30, 2013 ................... • July 1, 2015–June 30, 2017. 

Safety: 

• PSI–90 ................................................................ • July 1, 2011–June 30, 2013 ................... • July 1, 2015–June 30, 2017. 

b. Proposed Baseline and Performance 

Periods for the PSI–90 Measure in the 

Safety Domain in the FY 2020 Program 

Year 

The table below summarizes the 

previously adopted and proposed 

baseline and performance periods for 

the FY 2020 program year. In the FY 

2020 program year, we are proposing to 

adopt a performance period of July 1, 

2016 to June 30, 2018 for the PSI–90 

measure. We are proposing a 

corresponding baseline period of July 1, 

2012 to June 30, 2014. This will allow 

us to collect 24-months of data from 

hospitals on the PSI–90 measure. 

We are inviting comment on these 

proposals. 

PREVIOUSLY ADOPTED AND NEWLY PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2020 PROGRAM

YEAR

Domain Baseline period Performance period 

Clinical Care: 

• Mortality (MORT–30–AMI, MORT–30–HF, 

MORT–30–PN) *.

July 1, 2010–June 30, 2013 ....................... July 1, 2015–June 30, 2018. 

• THA/TKA *.

Safety: 

PSI (PSI–90) Measure ........................................... July 1, 2012–June 30, 2014 ....................... July 1, 2016–June 30, 2018. 

* Previously adopted baseline and performance periods. 

c. Proposed Baseline and Performance 

Periods for the Clinical Care Domain for 

the FY 2021 Program Year 

The table below summarizes the 

proposed baseline and performance 

periods for the FY 2021 program year. 

In the FY 2014 IPPS/LTCH PPS and FY 

2015 IPPS/LTCH PPS final rules (78 FR 

50692 through 50694; 79 FR 50072 

through 50073), we adopted baseline 

and performance periods for the three 

30-day mortality measures for the FY 

2017, FY 2018, FY 2019, and FY 2020 

program years. We adopted baseline and 

performance periods for the THA/TKA 

measure for the FY 2019 and FY 2020 

program years (79 FR 50073). We 

adopted this policy in light of the length 

of the performance period that is needed 

to collect enough measure data for 

reliable performance scoring. We 

continue to believe that we should 

adopt 36-month baseline and 

performance periods for the mortality 

measures when possible to 

accommodate those durations. 

We believe that a similar rationale 

applies to the new MORT–30–COPD 

measure that we are proposing to adopt 

for the Clinical Care domain for the FY 


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2021 program year. Furthermore, we are 

attempting to align measurement 

periods under the Hospital VBP 

Program with measurement periods 

under the Hospital IQR Program for the 

30-day mortality measures. Therefore, 

for the FY 2021 program year, we are 

proposing to adopt a 36-month 

performance period of July 1, 2016 

through June 30, 2019 for all mortality 

measures (the three previously adopted 

mortality measures, as well as the 

proposed MORT–30–COPD measure) in 

the Clinical Care domain. We also are 

proposing to adopt a corresponding 

baseline period of July 1, 2011 through 

June 30, 2014. We note that the 

proposed performance periods will 

align with the reporting periods for the 

mortality measures in the Hospital IQR 

Program for the first time. 

For the THA/TKA measure in the FY 

2021 program year, we are proposing to 

adopt a 36-month performance period of 

April 1, 2016 through March 31, 2019. 

We also are proposing to adopt a 

corresponding baseline period of April 

1, 2011 through March 31, 2014. This 

baseline and performance period will 

align with the THA/TKA measure 

reporting period for the Hospital IQR 

Program and will make reporting more 

seamless for hospitals. 

We are inviting public comment on 

these proposals. 

PROPOSED BASELINE AND PERFORMANCE PERIODS FOR THE FY 2021 PROGRAM YEAR

Domain Baseline period Performance period 

Clinical Care: 

• Mortality (MORT–30–AMI, MORT–30–HF, 

MORT–30–PN, MORT–30–COPD).

• July 1, 2011–June 30, 2014 ................... • July 1, 2016–June 30, 2019. 

• THA/TKA ............................................................. • April 1, 2011–March 31, 2014 ................ • April 1, 2016–March 31, 2019. 

7. Proposed Performance Standards for 

the Hospital VBP Program 

a. Background 

Section 1886(o)(3)(A) of the Act 

requires the Secretary to establish 

performance standards for the measures 

selected under the Hospital VBP 

Program for a performance period for 

the applicable fiscal year. The 

performance standards must include 

levels of achievement and improvement, 

as required by section 1886(o)(3)(B) of 

the Act, and must be established not 

later than 60 days before the beginning 

of the performance period for the fiscal 

year involved, as required by section 

1886(o)(3)(C) of the Act. We refer 

readers to the Hospital Inpatient VBP 

Program final rule (76 FR 26511 through 

26513) for further discussion of 

achievement and improvement 

standards under the Hospital VBP 

Program. 

In addition, when establishing the 

performance standards, section 

1886(o)(3)(D) of the Act requires the 

Secretary to consider appropriate 

factors, such as: (1) Practical experience 

with the measures, including whether a 

significant proportion of hospitals failed 

to meet the performance standard 

during previous performance periods; 

(2) historical performance standards; (3) 

improvement rates; and (4) the 

opportunity for continued 

improvement. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53599 through 53604), we 

adopted performance standards for the 

FY 2015 program year and certain FY 

2016 program year measures. We also 

finalized our policy to update 

performance standards for future 

program years via notice on the CMS 

Web site or another publicly available 

Web site. In the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50694 through 

50698), we revised our regulatory 

definitions of ‘‘achievement threshold’’ 

and ‘‘benchmark’’ at 42 CFR 412.160 

and adopted performance standards for 

additional FY 2016 program year 

measures. We also adopted an 

interpretation of ‘‘achievement 

threshold’’ and ‘‘benchmark’’ under 42 

CFR 412.160 to exclude the numerical 

values that result when the performance 

standards are calculated. We have 

further adopted a policy under which 

we may update a measure’s performance 

standards for a fiscal year once if we 

identify data issues, calculation errors, 

or other problems that would 

significantly affect the displayed 

performance standards (79 FR 50079). 

We refer readers to the FY 2014 IPPS/ 

LTCH PPS final rule for the complete set 

of FY 2016 performance standards (78 

FR 50697 through 50698). 

b. Technical Updates 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50077 through 50079), we 

adopted a policy under which we may 

adopt technical updates to performance 

standards under the Hospital VBP 

Program. We adopted this policy by 

amending the definition of 

‘‘performance standards’’ under 42 CFR 

412.160 of our regulations to enable us 

to update performance standards’ 

numerical values to incorporate 

nonsubstantive technical updates made 

to Hospital VBP Program measures 

between the time that they are adopted 

for a particular program year and the 

time that we actually calculate hospital 

performance on those measures after the 

performance period for the program year 

has concluded. We stated our intent to 

continue to use rulemaking to adopt 

substantive updates to measures 

adopted for the Hospital VBP Program. 

We stated that examples of changes that 

we might consider to be substantive 

include those in which the changes are 

so significant that the measure is no 

longer the same measure or when a 

standard of performance assessed by a 

measure becomes more stringent. 

However, we stated our intent to 

determine what constitutes substantive 

versus nonsubstantive changes on a 

case-by-case basis, although we affirmed 

our intent to be as transparent as 

possible with stakeholders about any 

such updates we might adopt. 

On January 29, 2015, we announced 

a technical update to the performance 

standards that we have adopted for the 

PSI–90 measure for the FY 2017 

program year. The announcement was 

published on QualityNet and can be 

viewed at: https://www.qualitynet.org/

dcs/ContentServer?c=Page&pagename=

QnetPublic%2FPage%2FQnetBasic&

cid=1228774624610. The update 

resulted from a more recent AHRQ 

Quality Indicator software version 

becoming available. The FY 2017 

performance standards were initially 

calculated using Version 4.4 of the 

AHRQ software, and the update allowed 

us to use Version 4.5a for both the 

performance standards and hospital 

results. 

For more detailed information on the 

updates implemented in Version 4.5a, 

we refer readers to the Log of Coding 

Updates and revisions, posted on 

QualityNet, available at: https://www.

qualitynet.org/dcs/ContentServer?c=

Page&pagename=QnetPublic%2F

Page%2FQnetTier4&cid=

1228695355425. For more information 

on differences between Version 4.5a and 

previous versions of the software, we 


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refer readers to the AHRQ Web site, 

available at: http://

qualityindicators.ahrq.gov or to the 

AHRQ help desk directly, available at: 

QIsupport@ahrq.hhs.gov or (307) 427– 

1949. 

c. Proposed Performance Standards for 

the FY 2018 Program Year 

In accordance with our finalized 

methodology for calculating 

performance standards (discussed more 

fully in the Hospital Inpatient VBP 

Program final rule (76 FR 26511 through 

26513)), we are proposing to adopt the 

following additional performance 

standards for the FY 2018 program year. 

We note that the numerical values for 

the performance standards displayed 

below represent estimates based on the 

most recently available data, and we 

intend to update the numerical values 

in the FY 2016 IPPS/LTCH PPS final 

rule. We note further that the MSPB–1 

measure’s performance standards are 

based on performance period data; 

therefore, we are unable to provide 

numerical equivalents for the standards 

at this time. 

We note further that the performance 

standards for the NHSN measures, the 

PSI–90 measure, and the MSPB–1 

measure are calculated with lower 

values representing better performance. 

This distinction is made in contrast to 

other measures for which higher values 

indicate better performance. As 

discussed further in the FY 2014 IPPS/ 

LTCH PPS final rule, the performance 

standards for the Colon and Abdominal 

Hysterectomy SSI are computed 

separately for each procedure stratum, 

and we will first award achievement 

and improvement points to each stratum 

separately, then compute a weighted 

average of the points awarded to each 

stratum by predicted infections (78 FR 

50684). 

PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR THE FY 2018 PROGRAM YEAR: SAFETY, 

CLINICAL CARE, AND EFFICIENCY AND COST REDUCTION MEASURES

Measure ID Description Achievement threshold Benchmark 

Safety Measures 

CAUTI * ................................ National Healthcare Safety Network Catheter-associated Urinary Tract Infection Outcome Measure.0.916 .................................. 0.000. 

CLABSI * .............................. National Healthcare Safety Network Central line-associated Bloodstream Infection Outcome Measure.0.401 .................................. 0.000. 

CDI * ..................................... National Healthcare Safety Network Facility-wide Inpatient Hospital-onset Clostridium difficile Infection 

Outcome Measure.

0.776 .................................. 0.000. 

MRSA bacteremia * ............. National Healthcare Safety Network Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus Bacteremia Outcome Measure.0.766 .................................. 0.000. 

PSI–90 ± * ............................. Patient safety for selected indicators (composite) ........ 0.577321 ............................ 0.397051. 

Colon and Abdominal 

Hysterectomy SSI *.

American College of Surgeons—Centers for Disease 

Control and Prevention Harmonized Procedure Specific Surgical Site Infection Outcome Measure.

• Colon ..........................................................................

• Abdominal Hysterectomy ...........................................

• 0.801 ..............................

• 0.745 ..............................

• 0.000. 

• 0.000. 

PC–01 .................................. Elective Delivery ............................................................ 0.022989 ............................ 0.000. 

Clinical Care Measures 

MORT–30–AMI ± .................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Acute Myocardial Infarction 

Hospitalization *.

0.851458 * .......................... 0.871669.* 

MORT–30–HF ± ................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Heart Failure *.0.881794 * .......................... 0.903985.* 

MORT–30–PN ± ................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization *.0.882986 * .......................... 0.908124.* 

Efficiency and Cost Reduction Measure 

MSPB–1 * ............................. Payment-Standardized Medicare Spending per Beneficiary.Median Medicare Spending 

per Beneficiary ratio 

across all hospitals during the performance period.

Mean of the lowest decile 

Medicare Spending per 

Beneficiary ratios across 

all hospitals during the 

performance period. 

* Lower values represent better performance. 

±Previously adopted performance standards. 

Based on public comments in the FY 

2015 IPPS/LTCH PPS final rule, we are 

proposing to adopt the ‘‘normalization’’ 

approach to scoring the PCCEC/CC 

domain, which will introduce only 

minor changes to the original scoring 

formula, as follows. For purposes of the 

HCAHPS Base Score, the new CTM–3 

dimensions would be calculated in the 

same manner as the eight existing 

HCAHPS dimensions. For each of the 

nine dimensions, Achievement Points 

(0–10 points) and Improvement Points 

(0–9 points) would be calculated, the 

larger of which would be summed 

across the nine dimensions to create a 

prenormalized HCAHPS Base Score (0– 

90 points, as compared to 0–80 points 

when only eight dimensions were 

included). The prenormalized HCAHPS 

Base Score would then be multiplied by 

8/9 (0.88888) and rounded according to 

standard rules (values of 0.5 and higher 

are rounded up, values below 0.5 are 

rounded down) to create the normalized 

HCAHPS Base Score. Each of the nine 

dimensions would be of equal weight, 


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so that, as before, the normalized 

HCAHPS Base Score would range from 

0 to 80 points. HCAHPS Consistency 

Points would then be calculated in the 

same manner as before and would 

continue to range from 0 to 20 points. 

The Consistency Points would now 

consider scores across all nine of the 

PCCEC/CC dimensions. The final 

element of the scoring formula would be 

the sum of the HCAHPS Base Score and 

the HCAHPS Consistency Points and 

will range from 0 to 100 points, as 

before. 

PROPOSED PERFORMANCE STANDARDS FOR THE FY 2018 PROGRAM YEAR PATIENT AND CAREGIVER-CENTERED

EXPERIENCE OF CARE/CARE COORDINATION DOMAIN

HCAHPS Survey dimension Floor 

(percent) 

Achievement 

threshold 

(percent) 

Benchmark 

(percent) 

Communication with Nurses ........................................................................................................ 52.85 78.45 86.70 

Communication with Doctors ....................................................................................................... 59.48 80.56 88.59 

Responsiveness of Hospital Staff ................................................................................................ 37.91 65.22 80.35 

Pain Management ........................................................................................................................ 50.17 70.26 78.44 

Communication about Medicines ................................................................................................ 45.50 63.38 73.61 

Hospital Cleanliness & Quietness ............................................................................................... 43.43 65.58 79.25 

Discharge Information .................................................................................................................. 62.00 86.50 91.58 

3-Item Care Transition * ............................................................................................................... 27.28 51.33 62.18 

Overall Rating of Hospital ............................................................................................................ 36.94 70.15 84.72 

* Newly proposed measure. 

We are inviting public comments on 

these proposed performance standards. 

d. Previously Adopted Performance 

Standards for Certain Measures for the 

FY 2019 Program Year 

As discussed above, we have adopted 

certain Safety and Clinical Care domain 

measures for future program years in 

order to ensure that we can adopt 

baseline and performance periods of 

sufficient length for performance 

scoring purposes. In the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50062 

through 50065), we adopted the PSI–90 

measure in the Safety domain and the 

THA/TKA measure in the Clinical Care 

domain for the FY 2019 program year. 

As with the PSI–90, MSPB–1, and 

NHSN measures described above, the 

THA/TKA measure is calculated with 

lower values representing better 

performance. Therefore, in the FY 2015 

IPPS/LTCH PPS final rule we adopted 

the following performance standards for 

the FY 2019 program year (79 FR 

50077): 

PREVIOUSLY ADOPTED PERFORMANCE STANDARDS FOR CERTAIN SAFETY AND CLINICAL CARE DOMAIN MEASURES FOR

THE FY 2019 PROGRAM YEAR

Measure ID Description Achievement 

threshold Benchmark 

Safety Measures 

PSI–90 * ........................................... Patient Safety for Selected Indicators (Composite) .................................. 0.853715 0.589462 

Clinical Care Measures 

MORT–30–AMI ................................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Acute Myocardial Infarction Hospitalization.

0.850671 0.873263 

MORT–30–HF .................................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Heart Failure Hospitalization.

0.883472 0.908094 

MORT–30–PN ................................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Pneumonia Hospitalization.

0.882334 0.909460 

THA/TKA * ........................................ Hospital-Level Risk-Standardized Complication Rate Following Elective 

Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty.

0.032229 0.023178 

* Lower values represent better performance. 

e. Previously Adopted and Newly 

Proposed Performance Standards for 

Certain Measures for the FY 2020 

Program Year 

As discussed above, we have adopted 

certain Safety and Clinical Care domain 

measures for future program years in 

order to ensure that we can adopt 

baseline and performance periods of 

sufficient length for performance 

scoring purposes. In the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50063 

through 50065), we adopted the PSI–90 

measure in the Safety domain and the 

THA/TKA measure in the Clinical Care 

domain for the FY 2019 program year 

and subsequent years. In the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

50077), we also adopted the following 

performance standards for the MORT– 

30–AMI, MORT–30–HF, MORT–30–PN, 

and THA/TKA measures for the FY 

2020 program year. In this proposed 

rule, we are proposing performance 

standards for the PSI–90 measure for the 

FY 2020 program year as set forth 

below: 


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PREVIOUSLY ADOPTED AND PROPOSED PERFORMANCE STANDARDS FOR CERTAIN CLINICAL CARE DOMAIN AND SAFETY

DOMAIN MEASURES FOR THE FY 2020 PROGRAM YEAR

Measure ID Description Achievement 

threshold Benchmark 

Safety Domain 

PSI–90* ............................................ Patient Safety for Selected Indicators (Composite) .................................. 0.778761 0.545903 

Clinical Care Domain 

MORT–30–AMI ± .............................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Acute Myocardial Infarction Hospitalization.

0.853715 0.875869 

MORT–30–HF ± ............................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Heart Failure Hospitalization.

0.881090 0.906068 

MORT–30–PN ± ............................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Pneumonia Hospitalization.

0.882266 0.909532 

THA/TKA * ± ...................................... Hospital-Level Risk-Standardized Complication Rate Following Elective 

Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty.

0.032229 0.023178 

* Lower values represent better performance. 

±Previously adopted performance standards. 

f. Proposed Performance Standards for 

Certain Measures for the FY 2021 

Program Year 

We are proposing the following 

performance standards for the FY 2021 

program year for the Clinical Care 

domain measures (THA/TKA, MORT– 

30–HF, MORT–30–AMI, MORT–30–PN, 

and the proposed MORT–30–COPD): 

PROPOSED PERFORMANCE STANDARDS FOR CLINICAL CARE DOMAIN MEASURES FOR THE FY 2021 PROGRAM YEAR

Measure ID Description Achievement 

threshold Benchmark 

Clinical Care Measures 

MORT–30–AMI ................................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Acute Myocardial Hospitalization.

0.860355 0.879714 

MORT–30–HF .................................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Heart Failure Hospitalization.

0.883803 0.906144 

MORT–30–PN ................................. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Pneumonia Hospitalization.

0.886443 0.91067 

MORT–30–COPD ............................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 

Chronic Obstructive Pulmonary Disease Hospitalization.

0.860355 0.879714 

THA/TKA * ........................................ Hospital-Level Risk-Standardized Complication Rate Following Elective 

Primary Total Hip Arthroplasty/Total Knee Arthroplasty.

0.03089 0.022304 

* Lower values represent better performance. 

8. Proposed FY 2018 Program Year 

Scoring Methodology 

a. Proposed Domain Weighting for the 

FY 2018 Program Year for Hospitals 

That Receive a Score on All Domains 

In the FY 2015 IPPS/LTCH PPS final 

rule, we adopted the following domains 

and domain weights for the FY 2017 

program year for hospitals that receive 

a score in all newly aligned domains: 

DOMAIN WEIGHTS FOR THE FY 2017 PROGRAM YEAR FOR HOSPITALS RECEIVING A SCORE ON ALL DOMAINS

Domain Weight 

Safety ........................................................................................................................................... 20 percent. 

Clinical Care ................................................................................................................................ 30 percent. 

• Clinical Care—Outcomes .................................................................................................. • 25 percent. 

• Clinical Care—Process ..................................................................................................... • 5 percent. 

Efficiency and Cost Reduction .................................................................................................... 25 percent. 

Patient and Caregiver-Centered Experience of Care/Care Coordination ................................... 25 percent. 


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For the FY 2018 program year, we are 

proposing to remove two ‘‘topped-out’’ 

measures from the Clinical Care— 

Process subdomain. In addition, we are 

proposing to move one measure (PC–01) 

from the Clinical Care—Process 

subdomain to the Safety domain and to 

remove the Clinical Care—Process 

subdomain. 

If these proposals are adopted, the 

Safety domain will include seven 

measures for the FY 2018 program year, 

including PC–01, which would be new 

to that domain. Because we are 

proposing to move one measure to the 

Safety domain, and because we 

continue to believe that hospitals 

should be provided strong incentives to 

perform well on measures of patient 

safety, we are proposing to increase the 

Safety domain’s weight by 5 percentage 

points. We are proposing to adopt the 

following FY 2018 program year domain 

weighting for hospitals receiving a score 

on all proposed newly-aligned domains: 

PROPOSED DOMAIN WEIGHTS FOR THE FY 2018 PROGRAM YEAR FOR HOSPITALS RECEIVING A SCORE ON ALL DOMAINS

Domain Weight 

Safety ........................................................................................................................................... 25 percent. 

Clinical Care ................................................................................................................................ 25 percent. 

Efficiency and Cost Reduction .................................................................................................... 25 percent. 

Patient and Caregiver-Centered Experience of Care/Care Coordination ................................... 25 percent. 

We are inviting public comments on 

the proposed domain weights. 

b. Proposed Domain Weighting for the 

FY 2018 Program Year for Hospitals 

Receiving Scores on Fewer Than Four 

Domains 

In prior program years, we finalized a 

policy that hospitals must have received 

domain scores on all finalized domains 

in order to receive a TPS. However, 

because the Hospital VBP Program has 

evolved from its initial two domains to 

an expanded measure set with 

additional domains, we considered 

whether it was appropriate to continue 

this policy. 

Therefore, in the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53606 through 

53607), we finalized our proposal that, 

for the FY 2015 program year and 

subsequent years, hospitals with 

sufficient data to receive at least two out 

of the four domain scores that existed 

for the FY 2015 program year (that is, 

sufficient cases and measures to receive 

a domain score on at least two domains) 

will receive a TPS. We also finalized our 

proposal that, for hospitals with at least 

two domain scores, TPSs would be 

reweighted proportionately to the 

scored domains to ensure that the TPS 

is still scored out of a possible 100 

points and that the relative weights for 

the scored domains remain equivalent 

to the weighting which occurs when 

there are scores in all four domains. We 

believe that this approach allows us to 

include relatively more hospitals in the 

Hospital VBP Program while continuing 

to focus on reliably scoring hospitals on 

their quality measure performance. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50701 through 50702), we 

continued this approach for the FY 2016 

program year and subsequent program 

years for purposes of eligibility for the 

program. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50084 through 50085), we 

adopted a policy that, for the FY 2017 

program year and subsequent years, 

hospitals must receive domain scores on 

at least three quality domains in order 

to receive a TPS. We stated our belief 

that, by adopting this policy, we will 

continue to allow as many hospitals as 

possible to participate in the program 

while ensuring that reliable TPSs result. 

We also finalized a policy that hospitals 

with sufficient data on at least three of 

four domains for FY 2017 will have 

their TPSs proportionately reweighted. 

Finally, in the FY 2015 IPPS/LTCH PPS 

final rule, we adopted case minimums 

for the FY 2016 program year and 

subsequent years (79 FR 50085 through 

50086). 

Under these policies, in order to 

receive a TPS for the FY 2018 program 

year: 

• Hospitals must meet the 

requirements to receive an HCAHPS 

Survey measure score in order to receive 

a PCCEC/CC domain score. Hospitals 

must report a minimum number of 100 

HCAHPS surveys for a hospital to 

receive a PCCEC/CC domain score (76 

FR 26530). 

• Hospitals must meet the 

requirements to receive a MSPB–1 

measure score in order to receive an 

Efficiency and Cost Reduction domain 

score. Hospitals must report a minimum 

number of 25 cases for the MSPB–1 

measure (77 FR 53609 through 53610). 

• Hospitals must receive a minimum 

of two measure scores within the 

Clinical Care domain. Hospitals must 

report a minimum number of 25 cases 

for each of the mortality measures (77 

FR 53609 through 53610). 

• Hospitals must receive a minimum 

of three measure scores within the 

Safety domain. 

++ Hospitals must report a minimum 

of three cases for any underlying 

indicator for the PSI–90 measure based 

on AHRQ’s measure methodology (77 

FR 53608 through 53609). 

++ Hospitals must report a minimum 

of one predicted infection for NHSNbased surveillance measures based on 

CDC’s minimum case criteria (77 FR 

53608 through 53609). 

++ Hospitals must report a minimum 

of 10 cases for the PC–01 measure (76 

FR 26530). 

We are not proposing any changes to 

the minimum numbers of cases and 

measures that we have adopted above. 

However, because we are proposing to 

remove the Clinical Care—Process 

subdomain from the Hospital VBP 

Program effective with the FY 2018 

program year, we considered whether 

we should revisit our finalized 

requirement that hospitals must receive 

scores on at least three domains in order 

to receive a TPS. However, we continue 

to believe that this requirement 

appropriately balances our desire to 

enable as many hospitals as possible to 

participate in the Hospital VBP Program 

and the need for TPSs to be sufficiently 

reliable to provide meaningful 

distinctions between hospitals’ 

performance on quality measures. We 

are not proposing to change this 

requirement at this time. We welcome 

public comments on whether we should 

consider adopting a different policy on 

this topic. We will continue to 

proportionately reweight hospitals’ 

TPSs when they have sufficient data on 

only three domains. 

G. Proposed Changes to the HospitalAcquired Condition (HAC) Reduction 

Program 

1. Background 

We refer readers to section V.I.1.a. of 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50707 through 50708) for a 

general overview of the HAC Reduction 

Program. 


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2. Statutory Basis for the HAC 

Reduction Program 

Section 3008 of the Affordable Care 

Act added section 1886(p) to the Act to 

provide an incentive for certain 

hospitals to reduce the incidence of 

HACs. Section 1886(p) of the Act 

requires the Secretary to make an 

adjustment to payments to ‘‘applicable 

hospitals’’ effective beginning on 

October 1, 2014, and for subsequent 

program years. Section 1886(p)(1) of the 

Act sets forth the requirements by 

which payments to ‘‘applicable 

hospitals’’ will be adjusted to account 

for HACs with respect to discharges 

occurring during FY 2015 or later. For 

hospitals with HAC scores in the top 

quartile relative to other applicable 

hospitals for a given fiscal year, the 

amount of Medicare payment is reduced 

to 99 percent of the amount of payment 

that would otherwise apply to 

discharges under section 1886(d) or 

1814(b)(3) of the Act, as applicable. 

Section 1886(p)(2)(A) of the Act defines 

‘‘applicable hospitals’’ as subsection (d) 

hospitals that meet certain criteria. 

Section 1886(p)(2)(B)(i) of the Act 

defines these criteria and specifies that 

the payment adjustment would apply to 

an applicable hospital that ranks in the 

top quartile (25 percent) of all 

subsection (d) hospitals, relative to the 

national average, of conditions acquired 

during the applicable period, as 

determined by the Secretary. Section 

1886(p)(2)(B)(ii) of the Act requires the 

Secretary to establish and apply a riskadjustment methodology in calculating 

HAC scores for each hospital. 

Sections 1886(p)(3) and (p)(4) of the 

Act define ‘‘hospital-acquired 

conditions’’ and ‘‘applicable period,’’ 

respectively. The term ‘‘hospitalacquired condition’’ means ‘‘a condition 

identified in subsection 

1886(d)(4)(D)(iv) of the Act and any 

other condition determined appropriate 

by the Secretary that an individual 

acquires during a stay in an applicable 

hospital, as determined by the 

Secretary.’’ The term ‘‘applicable 

period’’ means, with respect to a fiscal 

year, a period specified by the Secretary. 

Section 1886(p)(5) of the Act requires 

that, prior to FY 2015 and each 

subsequent fiscal year, the Secretary 

provide confidential reports to each 

applicable hospital with respect to the 

HAC Reduction Program scores for the 

applicable period, to give the hospitals 

an opportunity to review and correct the 

data. Section 1886(p)(6)(A) of the Act 

sets forth the reporting requirements by 

which the Secretary would make 

information available to the public 

regarding HACs for each applicable 

hospital. Section 1886(p)(6)(B) of the 

Act requires the Secretary to ensure that 

an applicable hospital has the 

opportunity to review, and submit 

corrections for, the information to be 

made public with respect to the HAC 

scores of the applicable hospital prior to 

such information being made public. 

Section 1886(p)(6)(C) of the Act requires 

that, once corrected, the HAC scores be 

posted on the Hospital Compare Web 

site (http://www.medicare.gov/hospital

compare/search.html) in an easily 

understandable format. 

Section 1886(p)(7) of the Act limits 

administrative and judicial review of 

certain determinations made pursuant 

to section 1886(p) of the Act. These 

determinations include: what qualifies 

as an applicable hospital; the 

specifications of a HAC; the Secretary’s 

determination of the ‘‘applicable 

period’’; the provision of confidential 

reports submitted to the applicable 

hospital; and the information publicly 

reported on the Hospital Compare Web 

site. 

3. Overview of Previous HAC Reduction 

Program Rulemaking 

For a further description of our 

policies for the HAC Reduction 

Program, we refer readers to the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50707 through 50729) and the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50087 

through 50104). These policies describe 

the general framework for 

implementation of the HAC Reduction 

Program including: (a) The relevant 

definitions applicable to the program; 

(b) the payment adjustment under the 

program; (c) the measure selection and 

conditions for the program, including a 

risk-adjustment and scoring 

methodology; (d) performance scoring; 

(e) the process for making hospitalspecific performance information 

available to the public, including the 

opportunity for a hospital to review the 

information and submit corrections; and 

(f) limitation of administrative and 

judicial review. 

We also have codified certain 

requirements of the HAC Reduction 

Program at 42 CFR 412.170 through 

412.172. 

4. Implementation of the HAC 

Reduction Program for FY 2016 

We are not proposing any changes to 

the above described policies for the 

implementation of the HAC Reduction 

Program for FY 2016. However, we are 

reminding readers that, in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50101 

through 50102), we finalized the 

following measures for use in the FY 

2016 program: AHRQ PSI–90 Composite 

and CDC Central Line-Associated 

Bloodstream Infection (CLABSI), 

Catheter-Associated Urinary Tract 

Infection (CAUTI) and Colon and 

Abdominal Hysterectomy Surgical Site 

Infection (SSI). We are not proposing to 

add or remove any measures for FY 

2016. 

We are providing an update on NQF 

proceedings for three of the measures 

previously finalized for the FY 2016 

program: PSI–90 Composite; CLABSI; 

and CAUTI. For FY 2016, we are 

retaining the AHRQ PSI–90 Composite 

measure (in Domain 1) that we adopted 

in the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50717). As we noted in the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 50090), the AHRQ PSI–90 Composite 

measure is undergoing NQF 

maintenance review. The PSI–90 

Composite measure currently consists of 

eight component indicators: PSI–3 

Pressure ulcer rate; PSI–6 Iatrogenic 

pneumothorax rate; PSI–7 Central 

venous catheter-related blood stream 

infections rate; PSI–8 Postoperative hip 

fracture rate; PSI–12 Postoperative 

pulmonary embolism/Deep vein 

thrombosis rate; PSI–13 Postoperative 

sepsis rate; PSI–14 Wound dehiscence 

rate; and PSI–15 Accidental puncture 

and laceration rate. 

As part of the NQF maintenance 

review process, AHRQ is considering 

the addition of PSI–9 Perioperative 

hemorrhage rate, PSI–10 Perioperative 

physiologic metabolic derangement rate, 

and PSI–11 Post-operative respiratory 

failure rate measures, or a combination 

of these three measures, to the PSI–90 

Composite measure. We consider the 

potential inclusion of additional 

component measures in the PSI–90 

Composite measure to be a significant 

change to the measure and, if that 

occurs, we would engage in notice-andcomment rulemaking prior to requiring 

the reporting of the revised composite 

for the HAC Reduction Program. At this 

time, the AHRQ PSI–90 Composite 

measure is continuing to undergo NQF 

maintenance review. No changes have 

been finalized. Therefore, we are not 

proposing any changes to this measure 

at this time. 

Similarly, in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50090), we noted 

that the CDC NHSN CAUTI and CLABSI 

measures in Domain 2 that we adopted 

in the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50717) for inclusion in FYs 

2015, 2016 and 2017 were undergoing 

NQF maintenance review. We stated in 

the FY 2015 IPPS/LTCH PPS final rule 

that if there are significant changes to 

these measures, we would engage in 

notice-and-comment rulemaking prior 

to requiring the reporting of the revised 


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72National Quality Forum. Measures search. 

Available at: http://www.qualityforum.org/QPS/

MeasureDetails.aspx?standardID=1122&print=0&

entityTypeID=1 and http://www.qualityforum.org/

QPS/MeasureDetails.aspx?standardID=1121&print=

0&entityTypeID=1. 

73Available at: https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=QnetPublic%2

FPage%2FQnetBasic&cid=1228773343598. 

measures. These measures have now 

completed the NQF maintenance review 

process, and modified versions of the 

measures were reendorsed by NQF on 

November 10, 2014.72 We note that 

reendorsed versions of the CDC NHSN 

CLABSI and CAUTI measures included 

a new statistical option for calculating 

the measure result, the Adjusted 

Ranking Metric (ARM), in addition to 

the standardized infection ratio (SIR) 

statistical option. For FY 2016, we will 

continue use of the CDC NHSN CLABSI 

and CAUTI measures as previously 

finalized for the program with use of the 

SIR. We will be working with CDC in 

the future to determine if the newly 

available ARM would be appropriate for 

use in the HAC Reduction Program. If 

we determine at a later time that the 

ARM is appropriate for use in the HAC 

Reduction Program and provides an 

advantage to the existing measure result 

(the SIR), we will propose this change 

in notice-and-comment rulemaking. 

We also note that we anticipate 

providing hospitals with their 

confidential hospital-specific reports 

and discharge level information used in 

the calculation of their FY 2016 Total 

HAC Score in late summer 2015 via the 

QualityNet Secure Portal.73 In order to 

have access to their hospital-specific 

reports, hospitals must register for a 

QualityNet Secure Portal account. We 

did not make any changes to the review 

and correction policies for FY 2016. 

Hospitals have a period of 30 days after 

the information is posted to the 

QualityNet Secure Portal to review and 

submit corrections for the calculation of 

their HAC Reduction Program measure 

scores, domain scores, and Total HAC 

Score for the fiscal year. 

5. Proposed Changes for Implementation 

of the HAC Reduction Program for FY 

2017 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50102), we finalized the 

following measures for use in the FY 

2017 program: AHRQ PSI–90 Composite 

and CDC NHSN CLABSI, CAUTI, Colon 

and Abdominal Hysterectomy SSI, 

Methicillin-Resistant Staphylococcus 

aureus (MRSA) Bacteremia, and 

Clostridium difficile (CDI). We are not 

proposing any changes to this measure 

set for FY 2017. We also are not 

proposing to make any changes to the 

measures from how they were finalized 

for use in the FY 2016 program (CAUTI, 

CLABSI, and Colon and Abdominal 

Hysterectomy SSI) or FY 2017 program 

(MRSA Bacteremia and CDI). 

For FY 2017, we are proposing three 

changes to existing program policies: (1) 

The dates of the time period used to 

calculate hospital performance; (2) the 

addition of a narrative rule used in the 

methodology to calculate the Domain 2 

score; and (3) the relative contribution 

of Domain 1 (patient safety) and Domain 

2 (infection) to the Total HAC Score. 

Each proposal is described in more 

detail below. 

a. Proposed Applicable Time Period for 

the FY 2017 HAC Reduction Program 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50717), we finalized and 

codified policy at 42 CFR 412.170 that 

provided that there will be a 2-year 

applicable time period to collect data 

used to calculate the Total HAC Score. 

For FY 2017, we are proposing to 

continue similar 2-year time periods for 

the calculation of HAC Reduction 

Program measure results. For the 

Domain 1 measure (AHRQ PSI–90 

Composite measure), we would use the 

24-month period from July 1, 2013 

through June 30, 2015. The claims for 

all Medicare FFS beneficiaries 

discharged during this period would be 

included in the calculations of measure 

results for FY 2017. For the CDC NHSN 

measures previously finalized for use in 

the FY 2017 HAC Reduction Program 

(CLABSI, CAUTI, Colon and Abdominal 

Hysterectomy SSI, MRSA Bacteremia, 

and CDI), we would use data from CYs 

2014 and 2015. 

We are seeking public comment on 

the proposal to use these updated time 

periods for calculation of measure 

results for the FY 2017 program. 

b. Proposed Narrative Rule Used in 

Calculation of the Domain 2 Score for 

the FY 2017 HAC Reduction Program 

We noted in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50723) that there 

will be instances in which applicable 

hospitals may not have data on all 

Domain 1 and 2 measures, and, 

therefore, a set of narrative rules was 

finalized to determine how to score each 

Domain. The scoring rules were 

finalized in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50723 through 

50725) and clarified in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50096 

through 50098). For FY 2017, we will 

follow the rules as previously finalized. 

As described below, we also are 

proposing an additional narrative rule 

for use beginning in the FY 2017 

program year. This additional narrative 

rule would be applicable to calculation 

of the Domain 2 score and would treat 

each Domain 2 measure independently 

when determining if a score of 10 

(maximal score) should be assigned to 

the measure for nonsubmission of data 

without a waiver (if applicable). 

We note that the current narrative 

rules for Domain 2 assign a score for 

each Domain 2 measure and the 

measure scores are averaged to provide 

a Domain 2 Score. For the FY 2015 and 

FY 2016 HAC Reduction Program, if a 

hospital reports data for at least one of 

the Domain 2 measures, its Domain 2 

Score is based solely on the measure(s) 

the hospital reported and the hospital is 

not assigned the maximum number of 

points for any nonreported measure(s). 

This approach was employed for the FY 

2015 and 2016 HAC Reduction Program 

because the applicable periods for the 

Domain 2 measures for those program 

years (the FY 2015 period was January 

1, 2012 through December 31, 2013, and 

the FY 2016 period was January 1, 2013 

through December 31, 2014) occurred, at 

least in part, prior to the announcement 

of the HAC Reduction Program with the 

publication of the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50707 through 

50729) in August 2013. The proposed 

applicable period for Domain 2 

measures in the FY 2017 program (CYs 

2014 and 2015) occurs in its entirety 

after the HAC Reduction Program was 

announced. This means hospitals were 

notified of the impact that not reporting 

these data would have on their Total 

HAC Score before the FY 2017 reporting 

period began (that is, before January 1, 

2014). Therefore, we are proposing for 

FY 2017 and subsequent program years 

that each Domain 2 measure be treated 

independently when determining if a 

score of 10 (maximal score) should be 

assigned to the measure for 

nonsubmission of data without a waiver 

(if applicable). For instance, if a hospital 

does not submit data for the Colon and 

Abdominal Hysterectomy SSI measure 

and does not have a valid waiver for 

nonreporting, the measure would 

receive a score of 10. This score of 10 

would then be combined with the 

measure scores the hospital received for 

data reported on the other FY 2017 

Domain 2 measures (CLABSI and 

CAUTI) to calculate the hospital’s total 

Domain 2 score. The rationale for this 

proposed change in methodology is to 

encourage hospitals to submit all 

available data on all measures in the 

program and to further encourage 

hospitals to reduce all HACs included 

in the program. 

We are inviting public comments on 

our proposal to implement the score 

calculations discussed above in FY 2017 


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74Available at: http://www.qualityforum.org/

map/. 

75 Ibid. 

and subsequent years, as well as our 

proposal for an additional narrative rule 

that would treat each Domain 2 measure 

independently when determining if a 

score of 10 (maximal score) should be 

assigned to the measure for 

nonsubmission of data without a waiver 

(if applicable). 

c. Proposed Domain 1 and Domain 2 

Weights for the FY 2017 HAC Reduction 

Program 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50102), we finalized for FY 

2016 a methodology for calculating a 

Total HAC Score for each hospital by 

determining a score for each domain, 

then multiplying each domain score by 

a weight (Domain 1—AHRQ Patient 

Safety Indicators, 25 percent; Domain 

2—CDC NHSN measures, 75 percent), 

and adding together the weighted 

domain scores to determine the Total 

HAC Score (§ 412.172(e)(3)). 

For FY 2017, we are proposing to 

adjust the weighting of Domains 1 and 

2 so that the weight of Domain 1 would 

be 15 percent and the weight of Domain 

2 would be 85 percent. We are 

proposing to decrease the Domain 1 

weight for two reasons. First, with the 

implementation of the CDC MRSA 

Bacteremia and CDI measures in the FY 

2017 program, we believe the weighting 

of both domains needs to be adjusted to 

reflect the addition of the fifth and sixth 

measure in Domain 2. Second, among 

the public comments on the FY 2014 

and FY 2015 IPPS/LTCH PPS final rules 

that were considered, MedPAC and 

other stakeholders recommended that 

Domain 2 should be weighted more than 

Domain 1 because they believed the 

CDC NHSN chart-abstracted measures 

were more reliable and actionable than 

claims-based measures. We are inviting 

public comments on this proposal to 

decrease the Domain 1 weight from 25 

percent to 15 percent and increase the 

Domain 2 weight from 75 percent to 85 

percent for FY 2017. 

6. Proposed Measure Refinements for 

the FY 2018 HAC Reduction Program 

a. Proposal to Include Select Ward 

(Non-Intensive Care Unit (ICU)) 

Locations in Certain CDC NHSN 

Measures Beginning in the FY 2018 

Program Year 

We are proposing measure 

refinements to the CDC NHSN CLABSI 

and CAUTI measures that were 

previously adopted for the HAC 

Reduction Program to include select 

ward (non-ICU) locations beginning in 

FY 2018. In the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50712 through 

50719), we adopted the CLABSI and 

CAUTI measures inclusive of pediatric 

and adult patients in ICUs for the HAC 

Reduction Program beginning with FY 

2015. We noted at that time that the 

Hospital IQR Program finalized data 

collection for these measures for adult 

and pediatric patients in medical, 

surgical and medical/surgical wards 

(also referred to as select ward 

locations), in addition to ICU locations, 

effective beginning January 1, 2015, and 

that we would propose the additional 

locations for the HAC Reduction 

Program in the future. 

The refined CAUTI and CLABSI 

measures that include select ward 

locations in addition to ICU locations 

were endorsed by the NQF in 2012. The 

MAP 2015 final recommendations 

indicated that the CLABSI and CAUTI 

measures with ICU and select ward 

locations be included in the HAC 

Reduction Program.74 We note that 

during the MAP Hospital Workgroup 

meeting (December 9–10, 2014) and the 

MAP Coordinating Committee meeting 

(January 26–27, 2015), some members 

discussed the benefit of reporting the 

modified measures publicly before 

including them in a payment program in 

order to allow providers and CMS to 

gain experience with the modified 

measures. Other members expressed 

concern that this could delay 

implementation of an improved 

measure 75. The MAP supported the use 

of the refined measures without 

stipulating prior public reporting as a 

condition of support. However, we 

acknowledge the importance of this 

consideration and took it into account 

when considering the timing of 

implementing the expanded measure in 

the HAC Reduction Program. 

We considered a number of options 

for when to begin using the refined 

measures in the HAC Reduction 

Program. The CDC NHSN measure data 

used in the HAC Reduction Program are 

obtained from data that hospitals report 

as part of their participation in the 

Hospital IQR program. Therefore, due to 

the timing of the Hospital IQR Program 

including select ward locations 

(beginning January 1, 2015), the FY 

2017 HAC Reduction Program, using the 

applicable period of CYs 2014 and 2015 

for the CDC NHSN measures, is the first 

time data from select ward locations 

could be included in the program. 

However, using select ward location 

data in the FY 2017 program would 

result in hospitals with ICU locations 

having the opportunity to contribute 2 

years of data, while hospitals without 

ICU locations would have the 

opportunity to contribute 1 year of data 

for measure result calculation. We 

believe this systematically unequal 

distribution of data could introduce bias 

in the program and should be avoided. 

If the introduction of select ward 

location data for the CLABSI and CAUTI 

measures is delayed until the FY 2018 

HAC Reduction Program (applicable 

period would likely be CYs 2015 and 

2016), all hospitals, regardless of 

whether or not they have ICUs, would 

have the opportunity to contribute 2 

years of data for measure result 

calculations. 

In addition, delaying implementation 

until FY 2018 would allow CMS and 

providers to gain some experience with 

the impact that the inclusion of these 

data would have on a hospital’s HAC 

Reduction Program scores. We also 

considered the possibility of further 

delaying implementation of the refined 

measures until the FY 2019 program 

(applicable period would likely be CYs 

2016 and 2017) in order to not include 

the first year of reporting (CY 2015) in 

a payment program measure calculation. 

After considering these three options, 

we are proposing to include data from 

pediatric and adult medical ward, 

surgical ward, and medical/surgical 

ward locations in addition to data from 

adult and pediatric ICU locations for the 

CDC NHSN CLABSI and CAUTI 

measures beginning with the FY 2018 

HAC Reduction Program. This option 

balances our belief that the refinement 

of the CLABSI and CAUTI measures to 

include select ward locations results in 

an improved measure that more 

accurately captures hospital-wide 

performance regarding these HACs with 

the need to provide hospitals with the 

opportunity to submit data for the full 

period of performance and the desire to 

gain experience with the refined 

measures before incorporating them into 

the HAC Reduction Program. We also 

believe this measure refinement will 

allow hospitals that do not have ICU 

locations to use the tools and resources 

of the NHSN for quality improvement 

and public reporting efforts (78 FR 

50787). 

We are inviting public comment on 

our proposal. 

b. Update to CDC NHSN Measures 

Standard Population Data 

In this section, we provide 

information regarding upcoming 

changes to the standard population data 

that are used to calculate the SIR for the 

CDC NHSN measures. These changes 

are occurring as part of routine measure 

maintenance. 


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76Available at: http://www.cdc.gov/nhsn/PDFs/

Newsletters/NHSN_NL_OCT_2010SE_final.pdf. 

77Available at: http://www.cdc.gov/nhsn/pdfs/

pscManual/7pscCAUTIcurrent.pdf; and http://

www.cdc.gov/HAI/surveillance/QA_

stateSummary.html. 

78Available at: http://www.cdc.gov/nhsn/PDFs/

Newsletters/NHSN_NL_OCT_2010SE_final.pdf. 

The CDC NHSN measures are used to 

monitor hospital performance on 

prevention of healthcare-associated 

infections (HAIs). For each NHSN 

measure, CDC calculates the SIR, which 

compares a hospital’s observed number 

of HAIs to the number of infections 

predicted for the hospital, adjusting for 

several risk factors.76 The predicted 

number of infections is determined 

using patient care location 

characteristics (for example, the number 

of central line days) and infection rates 

that occurred among a standard 

population during a specified time 

period (sometimes referred to by CDC as 

‘‘national baseline’’ but referred to here 

as ‘‘standard population data’’). For 

example, CDC currently uses data 

collected in CY 2009 for the CAUTI 

measure to determine the standard 

population data.77 For more information 

about the method by which NHSN 

measures are calculated, we refer 

readers to QualityNet’s Web page on 

HAI measures, which may be found at: 

https://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=Qnet

Public%2FPage%2FQnetTier2&cid=

1228760487021. 

As part of routine measure 

maintenance, CDC will be updating the 

standard population data to ensure the 

NHSN measures’ number of predicted 

infections reflects the current state of 

HAIs in the United States.78 Beginning 

January 1, 2015, CDC started collecting 

data to use in updating the standard 

population data for HAI measures. (The 

CY 2015 standard population data for 

HAI measures will hereinafter be 

referred to as ‘‘new standard population 

data.’’) Measure results using infections 

reported in CY 2016 will reflect the use 

of the new standard population data. It 

is anticipated that the new standard 

population data will affect the HAC 

Reduction Program beginning in FY 

2018 when the applicable period for the 

CDC NHSN measures included in the 

program is likely to include CY 2015 

and CY 2016. 

7. Maintenance of Technical 

Specifications for Quality Measures 

Technical specifications for AHRQ’s 

PSI–90 Composite measure in Domain 1 

can be found at AHRQ’s Web site at: 

http://qualityindicators.ahrq.gov/

Modules/PSI_TechSpec.aspx. Technical 

specifications for the CDC NHSN HAI 

measures in Domain 2 can be found at 

CDC’s NHSN Web site at: http://

www.cdc.gov/nhsn/acute-care-hospital/

index.html. Both Web sites provide 

measure updates and other information 

necessary to guide hospitals 

participating in the collection of HAC 

Reduction Program data. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50100), we described a 

policy under which we use a 

subregulatory process to make 

nonsubstantive updates to measures 

used for the HAC Reduction Program. 

We are not proposing any changes to 

this policy at this time. 

8. Proposed Extraordinary Circumstance 

Exception Policy for the HAC Reduction 

Program Beginning in FY 2016 and for 

Subsequent Years 

a. Background 

In the FY 2015 IPPS/LTCH PPS 

proposed rule (79 FR 28142), we 

welcomed public comment on whether 

a potential waiver or exception policy 

for hospitals located in areas that 

experience disasters or other 

extraordinary circumstances should be 

implemented, and the policy and 

operational considerations of such an 

extraordinary circumstance exception 

policy for the HAC Reduction Program. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50101), we indicated that we 

received many comments in support of 

CMS establishing a formal extraordinary 

circumstance exception policy under 

the HAC Reduction Program. We also 

previously indicated that any specific 

proposals related to the implementation 

of an extraordinary circumstance 

exception policy would be proposed 

through notice-and-comment 

rulemaking. After further consideration 

of commenters’ support of CMS 

establishing an extraordinary 

circumstance exception policy for the 

HAC Reduction Program, we agree with 

commenters that it may be possible for 

a hospital to experience a certain period 

of time during which it is not able to 

accurately collect quality measure data 

and/or to report those data in a timely 

manner due to an extraordinary 

circumstance beyond its control, and 

that a policy for taking into account 

such a circumstance should be 

proposed. 

In developing this proposed 

extraordinary circumstance exception 

policy for the HAC Reduction Program 

beginning in FY 2016 and for 

subsequent years, we considered a 

policy and process similar to that for the 

Hospital IQR Program, as finalized in 

the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51651), modified by the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50836) 

(designation of a non-CEO hospital 

contact), and further modified in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50277) (amended § 412.40(c)(2) to refer 

to ‘‘extension or exemption’’ instead of 

the former ‘‘extension or waiver’’). We 

also considered how best to align an 

extraordinary circumstance exception 

policy for the HAC Reduction Program 

with existing extraordinary 

circumstance exception policies for 

other IPPS quality reporting and 

payment programs, such as the Hospital 

VBP Program, to the extent feasible. 

We considered the feasibility and 

implications of excluding data for 

certain measures for a limited period of 

time from the calculations for a 

hospital’s measure results or Total HAC 

score for the applicable performance 

period. By minimizing the data 

excluded from the program, the 

proposed policy would enable affected 

hospitals to continue to participate in 

the HAC Reduction Program for a given 

fiscal year if they otherwise continue to 

meet applicable measure minimum 

threshold requirements. We believe that 

this approach could help alleviate the 

reporting burden for a hospital that is 

adversely impacted by a natural disaster 

or other extraordinary circumstance 

beyond its control, while enabling the 

hospital to continue to participate in the 

HAC Reduction Program. 

b. Requests for an Extraordinary 

Circumstance Exception 

Based upon our prior experience with 

the Hospital IQR Program and the 

Hospital VBP Program, we anticipate 

the need to provide exceptions to only 

a small number of hospitals affected by 

a natural disaster or other extraordinary 

circumstance. During the review of a 

hospital’s request for an extraordinary 

circumstance exception, we will 

maintain the general principle that 

providing high quality of care and 

ensuring patient safety is of paramount 

importance. We do not intend to allow 

a hospital to use this proposed policy 

and the request process to seek 

exclusion from the HAC Reduction 

Program in its entirety for a given fiscal 

year(s) solely because of experiencing 

an extraordinary circumstance. Rather, 

we intend to provide relief for a hospital 

whose ability to accurately collect 

quality measure data and/or to report 

those data in a timely manner has been 

negatively impacted as a direct result of 

experiencing a significant disaster or 

other extraordinary circumstance 

beyond the control of the hospital. 

Section 1886(p)(4) of the Act permits 

the Secretary to determine the 

‘‘applicable period’’ for HAC data 


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collection, and we believe that the 

statute allows us to determine that the 

period not include times when hospitals 

may encounter extraordinary 

circumstances. 

We are proposing that the request 

process for an extraordinary 

circumstance exception begin with the 

submission of an extraordinary 

circumstance exception request form by 

a hospital within 90 calendar days of 

the natural disaster or other 

extraordinary circumstance. We believe 

that the 90-calendar day timeframe is an 

appropriate period of time for a hospital 

to determine whether to submit an 

extraordinary circumstance exception 

request. It is also the same length of 

time as the current time period allowed 

under the Hospital VBP Program. Under 

this proposed policy, a hospital would 

be able to request a HAC Reduction 

Program extraordinary circumstance 

exception at the same time it may 

request a similar exception under the 

Hospital IQR Program, the Hospital VBP 

Program, and the Hospital Readmissions 

Reduction Program (if an extraordinary 

circumstance exception policy is 

adopted for the Hospital Readmissions 

Reduction Program as described in 

section IV.E.9. of the preamble of this 

proposed rule). The extraordinary 

circumstance exception request form 

would be made available on the 

QualityNet Web site (https://

www.qualitynet.org/). 

The following minimum set of 

information would be required to 

submit the request: 

• Hospital CCN; 

• Hospital name; 

• Hospital Chief Executive Officer 

(CEO) and any other designated 

personnel contact information, 

including name, email address, 

telephone number, and mailing address 

(must include a physical address; a post 

office box address is not acceptable); 

• Hospital’s reason for requesting an 

exception, including: 

++ CMS program name (for example, 

the HAC Reduction Program, the 

Hospital VBP Program, or the Hospital 

IQR Program); 

++ The measure(s) and submission 

quarters affected by the extraordinary 

circumstance that the hospital is seeking 

an exception for should be accompanied 

with the specific reasons why the 

exception is being sought; and 

++ How the extraordinary 

circumstance negatively impacted 

performance on the measure(s) for 

which an exception is being sought; 

• Evidence of the impact of the 

extraordinary circumstances, including 

but not limited to, photographs, 

newspaper, and other media articles; 

and 

• The request form must be signed by 

the hospital’s CEO or designated nonCEO contact and submitted to CMS. 

The same set of information is 

currently required under the Hospital 

IQR Program and the Hospital VBP 

Program on the request form from a 

hospital seeking an extraordinary 

circumstance exception with respect to 

these programs. The specific list of 

required information would be subject 

to change from time to time at the 

discretion of CMS. 

Following receipt of the request form, 

CMS would: (1) Provide a written 

acknowledgement of receipt of the 

request using the contact information 

provided in the request form to the CEO 

and any additional designated hospital 

personnel; and (2) provide a formal 

response to the CEO and any additional 

designated hospital personnel using the 

contact information provided in the 

request notifying them of the CMS 

decision. Under the proposed policy, we 

would review each request for an 

extraordinary circumstance exception 

on a case-by-case basis at CMS’ 

discretion. To the extent feasible, we 

also would review such a request in 

conjunction with any similar requests 

made under other IPPS quality reporting 

and payment programs, such as the 

Hospital IQR Program and the Hospital 

VBP Program. 

The proposed policy would not 

preclude CMS from granting 

extraordinary circumstance exceptions 

to hospitals that do not request them if 

we determine at our discretion that a 

disaster or other extraordinary 

circumstance has affected an entire 

region or locale. If CMS makes such a 

determination to grant an extraordinary 

circumstance exception to hospitals in 

an affected region or locale, we would 

convey this decision through routine 

communication channels to hospitals, 

vendors, and QIOs, including, but not 

limited, to issuing memos, emails, and 

notices on the QualityNet Web site at: 

https://www.qualitynet.org/. This 

provision also would align with the 

Hospital IQR Program’s extraordinary 

circumstances extension or exemption 

policy, as set forth in the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51651). 

We are inviting public comment on 

this proposal. 

H. Proposed Elimination of the 

Simplified Cost Allocation Methodology 

for Hospitals (§ 412.302) 

1. Background 

The Medicare hospital cost report 

employs a cost-finding methodology to 

allocate direct and indirect costs using 

statistics appropriate to each 

department within a hospital. The costs 

of nonrevenue-producing cost centers 

(general service or overhead cost 

centers) are allocated to each other and 

to the revenue-producing cost centers 

using statistical bases and related 

statistics that measure the amount of 

service furnished by each cost center to 

the other cost centers (42 CFR 413.24(b) 

and (d)). In this regard, cost-finding is 

the process of recasting the data derived 

from the accounts ordinarily kept by a 

provider to ascertain costs of the various 

types of services furnished (42 CFR 

413.24(b)(1)). 

In the FY 1997 IPPS final rule (61 FR 

46214 through 46215), CMS 

implemented the simplified cost 

allocation methodology at 42 CFR 

412.302(d)(4) for hospitals as an 

alternative to the standard cost-finding 

methodology. The simplified cost 

allocation methodology reduces the 

number of statistical bases that a 

hospital must maintain. Under the 

simplified cost allocation methodology, 

a hospital must use a prescribed list of 

statistical bases, without deviation, as 

set forth in the Provider Reimbursement 

Manual (PRM) (CMS Pub. 15–2), Section 

4020, Form CMS–2552. The simplified 

cost allocation methodology was 

devised in response to concerns 

expressed by the hospital industry over 

20 years ago regarding the high costs of 

the recordkeeping required under the 

cost reporting rules. Since 

implementation of the simplified cost 

allocation methodology, there have been 

advances in technology of 

recordkeeping for hospitals, resulting in 

less arduous and costly recordkeeping 

and a diminished need for hospitals to 

use the simplified cost allocation 

methodology. It was expected that, 

although use of the simplified cost 

allocation methodology by hospitals 

would result in reduced recordkeeping 

costs, it also would likely result in 

reduced Medicare payments to 

hospitals. 

In the FY 2011 IPPS/LTCH PPS final 

rule (75 FR 50075 through 50080), we 

created standard cost centers for 

Magnetic Resonance Imaging (MRI) and 

computed tomography (CT) scans, and 

required that hospitals report the costs 

and charges for these services under 

new cost centers on the Medicare cost 

report Form CMS–2552–10. The new 

standard cost centers for MRIs and CT 

scans were effective for cost reporting 

periods beginning on or after May 1, 

2010. 

Beginning in FY 2014, we started to 

calculate the MS–DRG relative weights 

using 19 CCRs, including distinct CCRs 


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for MRIs and CT scans. In addition, 

beginning in the CY 2014 OPPS, we 

started to calculate the OPPS relative 

payment weights using distinct CCRs for 

MRIs and CT scans. Some stakeholders 

expressed concern that CMS was not 

appropriately determining the cost of 

advanced imaging for inpatient and 

outpatient hospital services because, 

when the costs of hospitals that use the 

simplified cost allocation methodology 

are included in cost determinations, less 

precise CCRs are generated. In response 

to public comments on the FY 2014 

IPPS/LTCH PPS proposed rule (78 FR 

27486) and the CY 2014 OPPS/ASC 

proposed rule (78 FR 43547), in the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50521 through 50523) and in the CY 

2014 OPPS/ASC final rule with 

comment period (78 FR 74843 through 

74847), we encouraged hospitals to use 

the statistical basis of ‘‘dollar value’’ for 

the costs of capital-related movable 

equipment, especially for costly MRI 

and CT imaging equipment, to support 

a more precise cost allocation and, 

therefore, more precise CCRs. However, 

a hospital that may have obtained an 

approval from a MAC under section 

2313 of CMS Pub. 15–1 to use the 

simplified cost allocation methodology 

was restricted by the prescribed 

statistical basis of ‘‘square footage’’ for 

costs of capital-related movable 

equipment. In those instances, we 

recommended that hospitals use the 

statistical basis of the dollar value or use 

the ‘‘Direct Assignment of General 

Service Cost’’ method by requesting 

MAC approval in accordance with 

section 2307 of CMS Pub. 15–1. 

In this proposed rule, we are 

proposing to eliminate the simplified 

cost allocation methodology because, as 

discussed above, the allocation of the 

costs of capital-related movable 

equipment using this methodology 

yields less precise calculated CCRs. 

Currently, less than 1 percent of 

hospitals have elected to use the 

simplified cost allocation methodology. 

Based on FY 2013 data, only 9 of 1,269 

CAHs and 23 of 4,389 hospitals other 

than CAHs used the simplified cost 

allocation methodology. Furthermore, 

we believe that advances in technology 

have reduced the cost of recordkeeping, 

which has allowed hospitals to maintain 

accurate statistical data and afforded 

them the flexibility to change to a more 

precise allocation methodology. 

2. Proposed Changes 

The regulations applicable to the 

election of the simplified cost allocation 

methodology are located in 42 CFR 

412.302. For the reasons set forth in 

section IV.H.1. of the preamble of this 

proposed rule, we are proposing to 

amend § 412.302 by revising paragraph 

(d)(4) to eliminate a hospital’s ability to 

elect the simplified cost allocation 

methodology under the terms and 

conditions provided in the instructions 

for CMS Form 2552 for cost reporting 

periods beginning on or after October 1, 

2015. 

I. Rural Community Hospital 

Demonstration Program 

1. Background 

Section 410A(a) of Public Law 108– 

173 required the Secretary to establish 

a demonstration program to test the 

feasibility and advisability of 

establishing ‘‘rural community’’ 

hospitals to furnish covered inpatient 

hospital services to Medicare 

beneficiaries. The demonstration pays 

rural community hospitals under a 

reasonable cost-based methodology for 

Medicare payment purposes for covered 

inpatient hospital services furnished to 

Medicare beneficiaries. A rural 

community hospital, as defined in 

section 410A(f)(1), is a hospital that— 

• Is located in a rural area (as defined 

in section 1886(d)(2)(D) of the Act) or is 

treated as being located in a rural area 

under section 1886(d)(8)(E) of the Act; 

• Has fewer than 51 beds (excluding 

beds in a distinct part psychiatric or 

rehabilitation unit) as reported in its 

most recent cost report; 

• Provides 24-hour emergency care 

services; and 

• Is not designated or eligible for 

designation as a CAH under section 

1820 of the Act. 

Section 410A(a)(4) of Public Law 108– 

173 specified that the Secretary was to 

select for participation no more than 15 

rural community hospitals in rural areas 

of States that the Secretary identified as 

having low population densities. Using 

2002 data from the U.S Census Bureau, 

we identified the 10 States with the 

lowest population density in which 

rural community hospitals were to be 

located in order to participate in the 

demonstration: Alaska, Idaho, Montana, 

Nebraska, Nevada, New Mexico, North 

Dakota, South Dakota, Utah, and 

Wyoming (source: U.S. Census Bureau, 

Statistical Abstract of the United States: 

2003). 

CMS originally solicited applicants 

for the demonstration in May 2004; 13 

hospitals began participation with cost 

reporting periods beginning on or after 

October 1, 2004. In 2005, 4 of these 13 

hospitals withdrew from the program 

and converted to CAH status. This left 

nine hospitals participating at that time. 

In 2008, we announced a solicitation for 

up to six additional hospitals to 

participate in the demonstration 

program. Four additional hospitals were 

selected to participate under this 

solicitation. These four additional 

hospitals began under the 

demonstration payment methodology 

with the hospital’s first cost reporting 

period starting on or after July 1, 2008. 

At that time, 13 hospitals were 

participating in the demonstration. 

Five hospitals (3 of the hospitals were 

among the 13 hospitals that were 

original participants in the 

demonstration program and 2 of the 

hospitals were among the 4 hospitals 

that began the demonstration program 

in 2008) withdrew from the 

demonstration program during CYs 

2009 and 2010. (Three of these hospitals 

indicated that they would be paid more 

for Medicare inpatient hospital services 

under the rebasing option allowed 

under the SCH methodology provided 

for under section 122 of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (Pub. L. 110–275). 

One hospital restructured to become a 

CAH, and one hospital closed.) In CY 

2011, one hospital that was among the 

original set of hospitals that participated 

in the demonstration withdrew from the 

demonstration. These actions left seven 

of the originally participating hospitals 

(that is, hospitals that were selected to 

participate in either 2004 or 2008) 

participating in the demonstration 

program as of June 1, 2011. 

Sections 3123 and 10313 of the 

Affordable Care Act (Pub. L. 111–148) 

amended section 410A of Public Law 

108–173, changing the rural community 

hospital demonstration program in 

several ways. First, the Secretary is 

required to conduct the demonstration 

program for an additional 5-year period, 

to begin on the date immediately 

following the last day of the initial 5- 

year period. Further, the Affordable 

Care Act requires, in the case of a rural 

community hospital that is participating 

in the demonstration program as of the 

last day of the initial 5-year period, the 

Secretary to provide for the continued 

participation of such rural hospital in 

the demonstration program during the 

5-year extension period, unless the 

hospital makes an election to 

discontinue participation. 

In addition, the Affordable Care Act 

provides that, during the 5-year 

extension period, the Secretary shall 

expand the number of States with low 

population densities determined by the 

Secretary to 20. Further, the Secretary is 

required to use the same criteria and 

data that the Secretary used to 

determine the States for the initial 5- 

year period. The Affordable Care Act 

also allows not more than 30 rural 


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community hospitals in such States to 

participate in the demonstration 

program during the 5-year extension 

period. 

We published a solicitation for 

applications for additional participants 

in the rural community hospital 

demonstration program in the Federal 

Register on August 30, 2010 (75 FR 

52960). Applications were due on 

October 14, 2010. The 20 States with the 

lowest population density that were 

eligible for the demonstration program 

are: Alaska, Arizona, Arkansas, 

Colorado, Idaho, Iowa, Kansas, Maine, 

Minnesota, Mississippi, Montana, 

Nebraska, Nevada, New Mexico, North 

Dakota, Oklahoma, Oregon, South 

Dakota, Utah, and Wyoming (source: 

U.S. Census Bureau, Statistical Abstract 

of the United States: 2003). We 

approved 19 new hospitals for 

participation in the demonstration 

program. We determined that each of 

these new hospitals would begin 

participating in the demonstration with 

its first cost reporting period beginning 

on or after April 1, 2011. 

Three of these 19 hospitals declined 

participation prior to the start of the cost 

reporting periods for which they would 

have begun the demonstration. In 

addition to the 7 hospitals that were 

selected in either 2004 or 2008, the new 

selection led to a total of 23 hospitals in 

the demonstration. During CY 2013, one 

additional hospital among the set 

selected in 2011 withdrew from the 

demonstration, similarly citing a 

relative financial advantage to returning 

to the customary SCH payment 

methodology, which left 22 hospitals 

participating in the demonstration. 

In addition, section 410A(c)(2) of 

Public Law 108–173 required that, in 

conducting the demonstration program 

under this section, the Secretary must 

ensure that the aggregate payments 

made by the Secretary do not exceed the 

amount which the Secretary would have 

paid if the demonstration program 

under this section was not 

implemented. This requirement is 

commonly referred to as ‘‘budget 

neutrality.’’ Generally, when we 

implement a demonstration program on 

a budget neutral basis, the 

demonstration program is budget 

neutral in its own terms; in other words, 

the aggregate payments to the 

participating hospitals do not exceed 

the amount that would be paid to those 

same hospitals in the absence of the 

demonstration program. Typically, this 

form of budget neutrality is viable 

when, by changing payments or aligning 

incentives to improve overall efficiency, 

or both, a demonstration program may 

reduce the use of some services or 

eliminate the need for others, resulting 

in reduced expenditures for the 

demonstration program’s participants. 

These reduced expenditures offset 

increased payments elsewhere under 

the demonstration program, thus 

ensuring that the demonstration 

program as a whole is budget neutral or 

yields savings. However, the small scale 

of this demonstration program, in 

conjunction with the payment 

methodology, makes it extremely 

unlikely that this demonstration 

program could be viable under the usual 

form of budget neutrality. 

Specifically, cost-based payments to 

participating small rural hospitals are 

likely to increase Medicare outlays 

without producing any offsetting 

reduction in Medicare expenditures 

elsewhere. Therefore, a rural 

community hospital’s participation in 

this demonstration program is unlikely 

to yield benefits to the participant if 

budget neutrality were to be 

implemented by reducing other 

payments for these same hospitals. 

In the past 11 IPPS final rules, 

spanning the period for which the 

demonstration program has been 

implemented, we have adjusted the 

national inpatient PPS rates by an 

amount sufficient to account for the 

added costs of this demonstration 

program, thus applying budget 

neutrality across the payment system as 

a whole rather than merely across the 

participants in the demonstration 

program. As we discussed in the FYs 

2005 through 2015 IPPS final rules (69 

FR 49183; 70 FR 47462; 71 FR 48100; 

72 FR 47392; 73 FR 48670; 74 FR 43922, 

75 FR 50343, 76 FR 51698, 77 FR 53449, 

78 FR 50740, and 79 FR 50141, 

respectively), we believe that the 

language of the statutory budget 

neutrality requirements permits the 

agency to implement the budget 

neutrality provision in this manner. 

In general terms, in each of these 

previous years, we used available cost 

reports for the participating hospitals to 

derive an estimate of the additional 

costs attributable for the demonstration. 

Prior to FY 2013, we used finalized, or 

settled, cost reports, as available, and 

‘‘as submitted’’ cost reports for hospitals 

for which finalized cost reports were not 

available. Annual market basket 

percentage increase amounts provided 

by the CMS Office of the Actuary 

reflecting the growth in the prices of 

inputs for inpatient hospitals were 

applied to these cost amounts. In the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53452), we used ‘‘as submitted’’ cost 

reports (for cost reporting periods 

ending in CY 2010) for each hospital 

participating in the demonstration in 

estimating the costs of the 

demonstration. In addition, in FY 2013, 

we incorporated different update factors 

(the market basket percentage increase 

and the applicable percentage increase, 

as applicable, to several years of data as 

opposed to solely using the market 

basket percentage increase) for the 

calculation of the budget neutrality 

offset amount. Finally, in each of the 

previous years, an annual update factor 

provided by the CMS Office of the 

Actuary reflecting growth in the volume 

of inpatient operating services also was 

applied. For the budget neutrality 

calculations in the IPPS final rules for 

FYs 2005 through 2011, the annual 

volume adjustment applied was 2 

percent; for the IPPS final rules for FYs 

2012, 2013, 2014, and 2015, it was 3 

percent. For a detailed discussion of our 

budget neutrality offset calculations, we 

refer readers to the IPPS final rule 

applicable to the fiscal year involved. 

In general, for FYs 2005 through 2009, 

we based the budget neutrality offset 

estimate on the estimated cost of the 

demonstration in an earlier given year. 

For these periods, we derived that 

estimated cost by subtracting the 

estimated amount that would otherwise 

be paid without the demonstration in an 

earlier given year from the estimated 

amount for the same year that would be 

paid under the demonstration under the 

reasonable cost-based methodology 

authorized by section 410A of Public 

Law 108–173. The reasonable cost-based 

methodology authorized by section 

410A of Public Law 108–173, as 

amended, is hereafter referred to as the 

‘‘reasonable cost methodology.’’ (We 

ascertained the estimated amount that 

would be paid in an earlier given year 

under the reasonable cost methodology 

and the estimated amount that would 

otherwise be paid without the 

demonstration in an earlier given year 

from ‘‘as submitted’’ cost reports that 

were submitted by the hospitals prior to 

the inception of the demonstration.) We 

then updated the estimated cost 

described above to the current year by 

multiplying it by the market basket 

percentage increases applicable to the 

years involved and the applicable 

annual volume adjustment. For the FY 

2010 IPPS/RY 2010 LTCH PPS final 

rule, data from finalized cost reports 

reflecting the participating hospitals’ 

experience under the demonstration 

were available. Specifically, the 

finalized cost reports for the first 2 years 

of the demonstration, that is, cost 

reports for cost reporting years 

beginning in FYs 2005 and 2006 (CYs 

2004, 2005, and 2006) were available. 

These data showed that the actual costs 


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of the demonstration for these years 

exceeded the amounts originally 

estimated in the respective final rules 

for the budget neutrality adjustment. In 

the FY 2010 IPPS/RY 2010 LTCH PPS 

final rule, we included in the budget 

neutrality offset amount an amount in 

addition to the estimate of the 

demonstration costs in that fiscal year. 

This additional amount was based on 

the amount that the costs of the 

demonstration for FYs 2005 and 2006 

exceeded the budget neutrality offset 

amounts finalized in the IPPS rules 

applicable for those years. 

Following upon the FY 2010 IPPS/RY 

2010 LTCH PPS final rule, we continued 

to propose a methodology for 

calculating the budget neutrality offset 

amount to account for both the 

estimated demonstration costs in the 

upcoming fiscal year and an amount by 

which the actual demonstration costs 

corresponding to an earlier, given year 

(which would be known once finalized 

cost reports became available for that 

year) exceeded the budget neutrality 

offset amount finalized in the 

corresponding year’s IPPS final rule. 

However, we noted in the FYs 2011, 

2012, and 2013 IPPS final rules that, 

because of a delay affecting the 

settlement process for cost reports for 

IPPS hospitals occurring on a larger 

scale than merely for the demonstration, 

we were unable to finalize this 

component of the budget neutrality 

offset amount accounting for the amount 

by which the actual demonstration costs 

in a given year exceeded the budget 

neutrality offset amount finalized in the 

corresponding year’s IPPS final rule for 

cost reports of demonstration hospitals 

dating to those beginning in FY 2007. 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53449 through 53453), we 

adopted changes to the methodology for 

calculating the budget neutrality offset 

amount in an effort to further improve 

and refine the methodology. We noted 

that the revised methodology varied, in 

part, from the methodology finalized in 

the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51698 through 51705). We refer 

readers to the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53449 through 53453) 

for a detailed discussion of the 

methodology we used for FY 2013. We 

noted that, although we made changes 

to certain aspects of the budget 

neutrality offset amount calculation for 

FY 2013, several core components of the 

methodology remained unchanged. For 

example, we continued to include in the 

budget neutrality offset amount the 

estimate of the demonstration costs for 

the upcoming fiscal year and the 

amount by which the actual 

demonstration costs corresponding to an 

earlier year (which would be 

determined once we have finalized cost 

reports for that year) exceeded the 

budget neutrality offset amount 

finalized in the corresponding year’s 

IPPS final rule. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50739 through 50744), we 

determined the final budget neutrality 

offset amount to be applied to the FY 

2014 IPPS rates to be $52,589,741. This 

amount was comprised of two distinct 

components: (1) The final resulting 

difference between the estimated 

reasonable cost amount to be paid under 

the demonstration to the 22 

participating hospitals in FY 2014 for 

covered inpatient hospital services, and 

the estimated amount that would 

otherwise be paid to such hospitals in 

FY 2014 without the demonstration 

(this amount was $46,549,861); and (2) 

the amount by which the actual costs of 

the demonstration for FY 2007, as 

shown in the finalized cost reports for 

the hospitals that participated in the 

demonstration during FY 2007, 

exceeded the budget neutrality offset 

amount that was finalized in the FY 

2007 IPPS final rule (this amount, 

$6,039,880, was derived from finalized 

cost reports for cost reporting periods 

beginning in FY 2007 for the 9 hospitals 

that participated in the demonstration 

during that year). 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50141 through 50145), we 

stated the methodology for determining 

the budget neutrality adjustment factor 

to be applied to the FY 2015 national 

IPPS payment rates as follows. 

Step 1: For each of the participating 

hospitals, we identified the general 

reasonable cost amount calculated 

under the reasonable cost methodology 

for covered inpatient hospital services 

(as indicated on the ‘‘as submitted’’ cost 

report for the hospital’s cost reporting 

period ending in CY 2012). Because ‘‘as 

submitted’’ cost reports ending in CY 

2012 were the most recent available cost 

reports, we believe they were an 

accurate predictor of the costs of the 

demonstration in FY 2015. 

Because section 410A of Public Law 

108–173 stipulates swing-bed services 

are to be included among the covered 

inpatient hospital services for which the 

demonstration payment methodology 

applies, we included the cost of these 

services, as reported on the cost reports 

for the hospitals that provide swing-bed 

services, within the general total 

estimated FY 2012 reasonable cost 

amount for covered inpatient hospital 

services under the demonstration. As 

indicated above, we used ‘‘as 

submitted’’ cost reports for the 

hospital’s cost reporting period ending 

in CY 2012 for this calculation. 

We summed the two above-referenced 

amounts to calculate the general total 

estimated FY 2012 reasonable cost 

amount for covered inpatient hospital 

services for all participating hospitals. 

We multiplied this sum (that is, the 

general total estimated FY 2012 

reasonable cost amount for covered 

inpatient hospital services for all 

participating hospitals) by the FY 2013, 

FY 2014, and FY 2015 IPPS market 

basket percentage increases, which are 

formulated by the CMS Office of the 

Actuary. We then multiplied the 

product of the general total estimated 

FY 2012 reasonable cost amount for all 

participating hospitals and the market 

basket percentage increases applicable 

to the years involved by a 3-percent 

annual volume adjustment for FYs 2013 

through 2015—the result was the 

general total estimated FY 2015 

reasonable cost amount for covered 

inpatient hospital services for all 

participating hospitals. 

We used the IPPS market basket 

percentage increases because we believe 

that these update factors appropriately 

indicate the trend of increase in 

inpatient hospital operating costs under 

the reasonable cost methodology for the 

years involved. The 3-percent annual 

volume adjustment was stipulated by 

the CMS Office of the Actuary and was 

used because it is intended to reflect the 

tendency of hospitals’ inpatient 

caseloads to increase. Because inpatient 

caseloads for small hospitals may 

fluctuate, we incorporated into the 

estimate of demonstration costs a factor 

to allow for a potential increase in 

inpatient hospital services. 

Step 2: For each of the participating 

hospitals, we identified the general 

estimated amount that would otherwise 

be paid in FY 2012 under applicable 

Medicare payment methodologies for 

covered inpatient hospital services (as 

indicated on the ‘‘as submitted’’ cost 

report for cost reporting periods ending 

in CY 2012) if the demonstration had 

not been implemented. Similarly, as in 

Step 1, for the hospitals that provide 

swing-bed services, we identified the 

estimated amount that generally would 

otherwise be paid for these services and 

included it in the total FY 2012 general 

estimated amount that would otherwise 

be paid for covered inpatient hospital 

services without the demonstration. We 

summed these two amounts to calculate 

the estimated FY 2012 total payments 

that generally would otherwise be paid 

for covered inpatient hospital services 

for all participating hospitals without 

the demonstration. 


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We multiplied the above amount (that 

is, the estimated FY 2012 total payments 

that generally would otherwise be paid 

for covered inpatient hospital services 

for all participating hospitals without 

the demonstration) by the FYs 2013 

through 2015 IPPS applicable 

percentage increases. This methodology 

differs from Step 1, in which we applied 

the market basket percentage increases 

to the sum of the hospitals’ general total 

FY 2012 estimated reasonable cost 

amount for covered inpatient hospital 

services. We believe that the IPPS 

applicable percentage increases are 

appropriate factors to update the 

estimated amounts that generally would 

otherwise be paid without the 

demonstration. This is because IPPS 

payments would constitute the majority 

of payments that would otherwise be 

made without the demonstration and 

the applicable percentage increase is the 

factor used under the IPPS to update the 

inpatient hospital payment rates. 

Hospitals participating in the 

demonstration would be participating 

under the IPPS payment methodology if 

they were not in the demonstration. 

Then we multiplied the product of the 

estimated FY 2012 total payments that 

generally would otherwise be made 

without the demonstration and the IPPS 

applicable percentage increases for the 

years involved by a 3-percent annual 

volume adjustment for FYs 2013 

through 2015. The result represented 

the general total estimated FY 2015 

costs that would otherwise be paid 

without the demonstration for covered 

inpatient hospital services to the 

participating hospitals. 

Step 3: We subtracted the amount 

derived in Step 2 (representing the sum 

of estimated amounts that generally 

would otherwise be paid to the 

participating hospitals for covered 

inpatient hospital services for FY 2015 

if the demonstration were not 

implemented) from the amount derived 

in Step 1 (representing the sum of the 

estimated reasonable cost amount that 

generally would be paid under the 

demonstration to all participating 

hospitals for covered inpatient hospital 

services for FY 2015). For the FY 2015 

IPPS/LTCH PPS final rule, the resulting 

difference was $54,177,144 (79 FR 

50145). This estimated amount was 

based on the specific assumptions 

identified regarding the data sources 

used, that is, ‘‘as submitted’’ recently 

available cost reports. 

Also, in the FY 2015 IPPS/LTCH PPS 

final rule, we calculated the amount by 

which the actual costs of the 

demonstration in FY 2008 (that is, the 

costs of the demonstration for the 10 

hospitals that participated in FY 2008, 

as shown in these hospitals’ finalized 

cost reports for the cost report period 

beginning in that fiscal year), exceeded 

the budget neutrality offset amount that 

was finalized in the FY 2008 IPPS final 

rule. This amount, calculated for the FY 

2015 final rule, was $10,389,771 (79 FR 

50145). 

Therefore, the total budget neutrality 

offset amount applied to the FY 2015 

IPPS rates was $64,566,915. This was 

the sum of two separate components: (1) 

The difference between the total 

estimated FY 2015 reasonable cost 

amount to be paid under the 

demonstration to the 22 participating 

hospitals for covered inpatient hospital 

services, and the total estimated amount 

that would otherwise be paid to the 

participating hospitals in FY 2015 

without the demonstration 

($54,177,144); and (2) the amount by 

which the actual costs of the 

demonstration for FY 2008 (as shown in 

the finalized cost reports for cost 

reporting periods beginning in FY 2008 

for the hospitals that participated in the 

demonstration during FY 2008) exceed 

the budget neutrality offset amount that 

was finalized in the FY 2008 IPPS final 

rule ($10,389,771). 

2. Proposed FY 2016 Budget Neutrality 

Offset Amount 

In this FY 2016 IPPS/LTCH PPS 

proposed rule, in general, we are 

proposing to use the established 

methodology used in FY 2015 (as 

discussed earlier), with some 

modifications as discussed below, for 

determining the budget neutrality offset 

amount to be applied to the FY 2016 

national IPPS rates to reflect the costs of 

the demonstration. We are proposing to 

use ‘‘as submitted’’ cost reports ending 

in CY 2013 as the basis for estimating 

the reasonable cost amounts for covered 

services under the demonstration, as 

well as the amounts that would be paid 

absent the demonstration. As in 

previous years’ rules, we believe that 

because these are the most recent 

available cost reports, they will be an 

accurate predictor of these amounts. 

Although the proposed methodology 

for FY 2016 is similar to that for the past 

several rules, we note that the 

demonstration will have begun to phase 

out by the beginning of FY 2016, and 

because of this, we believe additional 

calculations would be appropriate. The 

7 ‘‘originally participating hospitals,’’ 

that is, those hospitals that began the 

demonstration between 2005 and 2009, 

will have ended their participation in 

the 5-year extension period authorized 

by the Affordable Care Act prior to the 

start of FY 2016. Therefore, we are 

proposing that the financial experience 

of these hospitals would not factor into 

the estimated reasonable cost amount 

and the estimated amounts that would 

otherwise be paid without the 

demonstration for FY 2016. 

The participation period for the 15 

hospitals that entered the demonstration 

following upon the Affordable Care Act 

amendments and that are still 

participating in the demonstration will 

end on a rolling basis according to the 

end dates of the hospitals’ cost report 

periods, respectively, from April 30, 

2016, through December 31, 2016. As 

further discussed below, our proposed 

methodology for estimating the 

reasonable cost amounts for covered 

inpatient hospital services under the 

demonstration, as well as the amounts 

that would otherwise be paid without 

the demonstration, would reflect the 

fact that some of the hospitals within 

this cohort will participate in the 

demonstration for only a fraction of the 

12 months in FY 2016. Eleven of these 

15 hospitals are scheduled to end the 

demonstration on or before September 

30, 2016; eight of these 11 hospitals are 

scheduled to end the demonstration 

prior to September 30, 2016. 

For each of these 8 hospitals, we are 

proposing that the FY 2016 estimated 

reasonable cost amount and the 

estimated amount that would otherwise 

be paid without the demonstration 

derived from the ‘‘as submitted’’ cost 

reports for cost reporting periods ending 

in CY 2013 be prorated according to the 

ratio of the number of months between 

October 1, 2015 and the end of the 

hospital’s cost reporting period in 

relation to the entire 12-month period. 

(For example, if a hospital’s cost 

reporting period end date is June 30, 

2016, the factor to be multiplied by the 

estimated reasonable cost amount and 

the estimated amount that would 

otherwise be paid without the 

demonstration from the calendar year 

end 2013 cost report is 0.75.) For the 7 

hospitals that would end the 

demonstration on either September 30, 

2016 or December 31, 2016, estimates of 

these amounts would correspond to the 

amounts indicated in the calendar year 

end 2013 cost reports. 

We note that the 7 hospitals that 

started the demonstration between FYs 

2005 and 2009 also will have ended 

their participation on a rolling basis 

during FY 2015. In the FY 2015 IPPS/ 

LTCH PPS final rule, in accordance with 

the policy we finalized in the FY 2015 

IPPS/LTCH PPS final rule, we based the 

estimate of the cost of the demonstration 

for FY 2015 on the financial experience 

as indicated on these hospitals’ CY 2012 

‘‘as submitted’’ cost reports (as 

discussed earlier) without making any 


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adjustment to reflect the fact that 

hospitals would be ending at different 

points during FY 2015. We believe this 

methodology was reasonable because 

only 5 hospitals are ending their 

participation in the demonstration 

before September 30, 2015, out of the 22 

hospitals on which the estimate of the 

cost of the demonstration for that year 

was based. Furthermore, as discussed 

previously, the methodology stated in 

this and previous rules for determining 

the costs of the demonstration in a given 

fiscal year entails the comparison of the 

actual costs of the demonstration as 

determined from finalized cost reports 

for that fiscal year (when they are 

available) to the estimated amount 

identified for that fiscal year in the 

corresponding fiscal year’s final rule. 

Consistent with this policy, this second 

step will be used to reconcile any 

differences between the estimated and 

actual demonstration costs for FY 2015 

once finalized cost reports for cost 

reporting periods beginning in FY 2015 

are available. Although we believe that 

our methodology for estimating costs for 

FY 2015 was reasonable, for FY 2016, 

we are proposing a more refined 

methodology to estimate the costs of the 

demonstration; that is, one that entails 

prorating, as discussed above, the 

estimated reasonable cost amount and 

the estimated amounts that would 

otherwise be paid without the 

demonstration as indicated on the ‘‘as 

submitted’’ cost reports for cost 

reporting periods ending in CY 2013 

based on the number of months that 

each hospital will have participated in 

the demonstration during FY 2016. 

Similar to previous years, we are 

proposing the methodology for 

calculating the budget neutrality offset 

amount to proceed in several steps, as 

follows. 

Step 1: For each of the 15 hospitals 

that will be participating in the 

demonstration during FY 2016, we are 

proposing to identify the general 

reasonable cost amount calculated 

under the reasonable cost methodology 

for covered inpatient hospital services 

for the period of participation during FY 

2016 based on ‘‘as submitted’’ cost 

reports ending in CY 2013. As discussed 

above, we are proposing that the basis 

of this estimate for each hospital 

scheduled to participate for part of FY 

2016 would be the fraction of the 

number of months that the hospital will 

be participating out of the 12 months 

within FY 2016 multiplied by the 

reasonable cost amount for covered 

inpatient hospital services indicated on 

the ‘‘as submitted’’ cost report ending in 

CY 2013. 

Given that 8 hospitals will be 

participating in the demonstration for 

part of FY 2016, we believe that such a 

methodology of prorating represents an 

appropriate refinement to the 

methodology established in previous 

rules for estimating the reasonable cost 

amount paid under the demonstration 

because each hospital’s relevant cost 

experience, respectively, which this 

estimated amount reflects, would apply 

for the specific number of months for 

which it is participating in the 

demonstration in FY 2016. We believe 

that applying the relevant fraction, 

representing the number of months that 

the hospital will have participated 

during FY 2016 out of the 12 months in 

the fiscal year, will lead to more precise 

estimates. 

Because section 410A of Public Law 

108–173 stipulates that swing-bed 

services are to be included among the 

covered inpatient hospital services for 

which the demonstration payment 

methodology applies, we are proposing 

to include the cost of these services, as 

reported on the ‘‘as submitted’’ cost 

reports ending in CY 2013 for the 

hospitals that provided swing-bed 

services in CY 2013, similarly prorated 

by the fraction of the number of months 

that the hospital will be participating 

out of the total number of months 

within FY 2016. 

Similar to the methodology applied in 

FY 2015, we are proposing to sum the 

two above-referenced amounts to 

calculate the general total estimated FY 

2013 reasonable cost amount for 

covered inpatient hospital services for 

all participating hospitals. Next, we are 

proposing to multiply the derived sum 

by the FY 2014, FY 2015, and FY 2016 

IPPS market basket percentage 

increases, which are formulated by the 

CMS Office of the Actuary. For this 

proposed rule, the current estimate of 

the FY 2016 IPPS market basket 

percentage increase provided by the 

CMS Office of the Actuary is specified 

in section IV.A. of the preamble of this 

proposed rule. We are proposing to use 

the final FY 2016 IPPS market basket 

percentage increase in the final rule. We 

are proposing to multiply this product 

of the prorated reasonable cost amount 

for all 15 hospitals (based on CY 2013 

‘‘as submitted’’ cost reports) and the 

market basket percentage increases 

applicable to the years involved by a 

3-percent annual volume adjustment for 

FYs 2014, 2015, and 2016. The result is 

the proposed total estimated FY 2016 

reasonable cost amount for covered 

inpatient hospital services for all 

hospitals participating in FY 2016. 

We are proposing to apply the IPPS 

market basket percentage increases 

applicable for FYs 2014 through 2016 to 

the reasonable cost amount derived 

from CY 2013 cost reports described 

earlier to model the estimated FY 2016 

reasonable cost amount under the 

demonstration. We are proposing to use 

the IPPS market basket percentage 

increases because we believe that these 

update factors appropriately indicate 

the trend of increase in inpatient 

hospital operating costs under the 

reasonable cost methodology involved. 

The 3-percent annual volume 

adjustment was stipulated by the CMS 

Office of the Actuary and is being used 

because it is intended to reflect the 

tendency of hospitals’ inpatient 

caseloads to increase. Because inpatient 

caseloads for small hospitals may 

fluctuate, we are proposing to 

incorporate into the estimate of 

demonstration costs a factor to allow for 

a potential increase in inpatient hospital 

services. 

Step 2: For each of the 15 hospitals 

that will be participating in FY 2016, we 

are proposing to identify the general 

estimated amount that would otherwise 

be paid in FY 2016 under applicable 

payment methodologies for covered 

inpatient hospital services (as indicated 

on the ‘‘as submitted’’ cost report for 

cost reporting periods ending in CY 

2013) if the demonstration was not 

implemented. Similar to Step 1, we are 

proposing that the basis of this estimate 

for each hospital participating for part of 

FY 2016 would be the fraction of the 

number of months that the hospital will 

be participating out of the 12 months 

within FY 2016 multiplied by the 

estimated amount that would otherwise 

be paid for these services as indicated 

on the ‘‘as submitted’’ cost report 

ending in CY 2013. We believe that such 

a methodology of prorating represents 

an appropriate refinement to the 

methodology established in previous 

rules for estimating the amount that 

otherwise would be paid without the 

demonstration because each hospital’s 

relevant costs and claims experiences, 

respectively, which this estimated 

amount reflects, would apply for the 

specific number of months for which it 

is participating in the demonstration in 

FY 2016. As we stated in Step 1, we 

believe that applying the relevant 

fraction, representing the number of 

months that the hospital will have 

participated during FY 2016 out of the 

12 months in the fiscal year, will lead 

to more precise estimates. 

Similarly, as in Step 1, for the 

hospitals that provide swing-bed 

services, we are proposing to include 

the amount that would otherwise be 

paid for these services without the 

demonstration, as reported on the ‘‘as 


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submitted’’ cost reports ending in CY 

2013 for the hospitals that provided 

swing-bed services in CY 2013. We are 

proposing to prorate, as appropriate, the 

estimated amount that would otherwise 

be paid for these services (as indicated 

on the ‘‘as submitted’’ cost report for 

cost reporting periods ending in CY 

2013) by the fraction of the number of 

months that the hospital will be 

participating in FY 2016 out of the total 

number of months within FY 2016, and 

include this amount in the total FY 2013 

general estimated amount that would 

otherwise be paid for covered inpatient 

hospital services without the 

demonstration. 

Similar to the methodology applied in 

FY 2015, we are proposing to sum these 

two amounts and multiply the derived 

sum by the FYs 2014, 2015, and 2016 

IPPS applicable percentage increases. 

For this proposed rule, the current 

estimate of the FY 2016 IPPS applicable 

percentage increase is specified in 

section IV.A. of the preamble of this 

proposed rule. (We are proposing to use 

the final FY 2016 applicable percentage 

increase in the final rule.) This 

methodology differs from Step 1, in 

which we are proposing to apply the 

IPPS market basket percentage increases 

to the sum of the hospitals’ general total 

FY 2013 estimated reasonable cost 

amount for covered inpatient hospital 

services. We believe that the IPPS 

applicable percentage increases are 

appropriate update factors to estimate 

the amounts that would generally 

otherwise be paid without the 

demonstration. This is because IPPS 

payments would constitute the majority 

of payments that would otherwise be 

made without the demonstration and 

the applicable percentage increase is the 

factor used under the IPPS to update the 

inpatient hospital payment rates. We are 

proposing then to multiply this product 

by a 3-percent annual volume 

adjustment for FYs 2014, 2015, and 

2016. The result represents the 

proposed general total estimated FY 

2016 amount that would otherwise be 

paid for covered inpatient hospital 

services without the demonstration to 

the hospitals that would be participating 

in FY 2016. 

Step 3: We are proposing to subtract 

the amount derived in Step 2 

(representing the sum of estimated 

amounts that generally would otherwise 

be paid to the participating hospitals for 

covered inpatient hospital services for 

FY 2016 if the demonstration had not 

been implemented) from the amount 

derived in Step 1 (representing the sum 

of the estimated reasonable cost amount 

that generally would be paid under the 

demonstration to all participating 

hospitals for covered inpatient hospital 

services for FY 2016). We are proposing 

that the resulting difference would 

represent one component of the 

estimated amount for which an 

adjustment to the national IPPS rates 

would be calculated (as further 

discussed below). 

For this proposed rule, the resulting 

difference is $26,195,949. This 

estimated amount is based on the 

specific assumptions identified 

regarding the data sources used, that is, 

‘‘as submitted’’ recently available cost 

reports. If updated data become 

available prior to the FY 2016 IPPS/ 

LTCH PPS final rule, we would use 

them to the extent appropriate to 

estimate the costs for the demonstration 

program in FY 2016. Therefore, the 

estimated budget neutrality offset 

amount may change in the final rule, 

depending on the availability of 

updated data. 

Step 4: We are proposing to include 

in the budget neutrality offset amount 

the amount by which the actual 

demonstration costs corresponding to an 

earlier given year (which would be 

determined once we have finalized cost 

reports for that year) differs from the 

budget neutrality offset amount 

finalized in the corresponding year’s 

IPPS final rule. (In the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50145), we 

calculated the amount by which the 

actual costs of the demonstration in FY 

2008 exceeded the budget neutrality 

offset amount that was finalized in the 

FY 2008 IPPS final rule. The 

corresponding differences for FYs 2005, 

2006, and 2007 were identified and 

included in the budget neutrality offset 

amounts in previous years’ IPPS final 

rules.) Currently, finalized cost reports 

for cost reporting periods beginning in 

FY 2009 are available for the 10 

hospitals that completed a cost report 

period starting in FY 2009. These cost 

reports have been issued by the MACs 

as finalized, and they have been subject 

to review processes specific to the 

calculations for cost-based payment as 

determined by the payment 

methodology for the demonstration. We 

note that CMS has issued a notice of 

reopening for several of these cost 

reports pertaining to an issue that affects 

hospitals nationwide. However, it is not 

yet known if, or to what extent, the 

calculations for budget neutrality under 

the demonstration would be affected in 

the event of a reopening of these cost 

reports. Until such a determination is 

made, we believe that it would be 

appropriate to use these cost reports this 

year for our calculations under Step 4 

for FY 2016 in order to take into account 

the actual costs of the demonstration for 

FY 2009 as soon as possible and to 

enhance the accuracy of the budget 

neutrality offset calculation. 

Therefore, in this proposed rule, we 

are identifying the difference between 

the total cost of the demonstration as 

indicated on these finalized FY 2009 

cost reports and the budget neutrality 

offset amount that was identified in the 

FY 2009 IPPS final rule, and we are 

proposing to adjust the current year’s 

budget neutrality offset amount by that 

difference. If there is a reopening that 

necessitates a recalculation for any of 

these reports, we would conduct 

another calculation once the affected 

cost reports are revised and finalized to 

determine the difference between the 

cost of the demonstration as reflected on 

the revised and finalized cost reports 

and the amount that was included in the 

budget neutrality offset amount for FY 

2009 as identified in the FY 2009 IPPS 

final rule (taking into account any 

amount already included in the 

finalized budget neutrality offset 

amount in the FY 2016 IPPS/LTCH PPS 

final rule that reflects an adjustment 

based on FY 2009 cost reports). If 

finalized cost reports for demonstration 

hospitals that participated in FY 2010 or 

FY 2011 are available prior to the FY 

2016 IPPS/LTCH PPS final rule, we 

intend to adjust the budget neutrality 

offset amount for FY 2016 for any 

amounts by which the finalized costs of 

the demonstration for the year (FY 2010 

or FY 2011) differ from the amounts 

included in the budget neutrality offset 

amount as finalized in the respective 

year’s IPPS final rule that indicate the 

estimated cost of the demonstration for 

that fiscal year. 

As further discussed below, we note 

that, for this proposed rule, Step 4 

would result in the amount indicating 

the actual cost of the demonstration for 

FY 2009 (determined from the current 

finalized FY 2009 cost reports described 

in Step 4) being less than the amount 

that was originally identified in the FY 

2009 IPPS final rule as the estimated 

cost of the demonstration. Therefore, we 

are proposing to include that 

component as a negative adjustment to 

the budget neutrality offset amount for 

the current fiscal year (as explained 

below). 

Step 5: The total budget neutrality 

offset amount that we are proposing to 

apply in determining the budget 

neutrality adjustment to the FY 2016 

IPPS rates would use the sum of the 

amounts derived in Steps 3 and 4. Each 

of these amounts represents a discrete 

calculation, reflecting the two-stage 

process of ensuring budget neutrality for 

the demonstration: (1) Estimating the 

costs of the demonstration prospectively 


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for the upcoming fiscal year from 

historical ‘‘as submitted’’ cost reports 

(Step 3), and (2) then retrospectively 

reconciling the difference between this 

estimate for a prior fiscal year and the 

actual costs as recorded on finalized 

cost reports for the specific fiscal year 

(Step 4). 

Therefore, for this FY 2016 LTCH/ 

LTCH PPS proposed rule, we are 

proposing to incorporate the following 

components into the calculation of the 

total budget neutrality offset: 

(a) The amount, derived from Step 3, 

representing the difference between the 

sum of the estimated reasonable cost 

amounts that would be paid under the 

demonstration to participating hospitals 

for covered inpatient hospital services 

for FY 2016 and the sum of the 

estimated amounts that would generally 

be paid if the demonstration had not 

been implemented. This amount would 

be based on ‘‘as submitted’’ cost reports 

for cost reporting periods ending in CY 

2013, and would be prorated according 

to the number of months that each 

hospital will have participated in the 

demonstration in FY 2016 out of the 12- 

month fiscal year period. This amount 

is $26,195,949. 

(b) The amount, as derived from Step 

4, by which the actual costs of the 

demonstration for FY 2009 (as shown in 

the finalized cost reports for the 10 

hospitals that completed a cost 

reporting period beginning in FY 2009) 

differ from the budget neutrality offset 

amount that was finalized in the FY 

2009 IPPS final rule. Analysis of this set 

of cost reports shows that the budget 

neutrality offset amount that was 

finalized in the FY 2009 IPPS final rule 

exceeds the actual cost of the 

demonstration by $8,457,452. 

For FY 2016, the total budget 

neutrality offset amount that we are 

proposing to apply is: The amount 

determined under item (a) of Step 5 

($26,195,949) minus the amount 

determined under item (b) of Step 5 

($8,457,452) or $17,738,497. We are 

proposing to subtract the amount under 

item (b) from that under item (a) 

because the amount under item (b) 

represents the amount by which the 

budget neutrality offset finalized in the 

FY 2009 IPPS final rule exceeded the 

actual costs of the demonstration for FY 

2009. Accordingly, we are proposing to 

reduce the budget neutrality offset 

amount for FY 2016 by that amount. 

If updated data become available prior 

to the FY 2016 IPPS/LTCH PPS final 

rule, we would use them to the extent 

appropriate to determine the budget 

neutrality offset amount for FY 2016. 

Therefore, the amount of the budget 

neutrality offset may change in the FY 

2016 IPPS/LTCH PPS final rule based 

on the availability of updated data. In 

addition, similar to previous years, we 

are proposing that if finalized cost 

reports for all of the demonstration 

hospitals that participated in an 

applicable year (FY 2010 or FY 2011) 

are available prior to the FY 2016 IPPS/ 

LTCH PPS final rule, we would adjust 

the budget neutrality offset amount to 

reflect the difference between the actual 

cost of the demonstration for the year 

(FY 2010 or FY 2011) and the budget 

neutrality offset amount applicable to 

such year as finalized in the respective 

year’s final rule, as explained in Step 4. 

The resulting total would be the amount 

for which an adjustment to the national 

IPPS rates would be made. 

We are inviting public comments on 

our proposals discussed above. 

Finally, we are considering whether 

to propose in future rulemaking that the 

calculation of the final costs of the 

demonstration for a fiscal year reflect 

that some of the participating hospitals 

would otherwise have been eligible for 

the payment adjustment for low-volume 

hospitals in that fiscal year if they had 

not participated in the demonstration. 

Our policy under the demonstration is 

that hospitals participating in the 

demonstration are not able to receive 

the low-volume payment adjustment in 

addition to the reasonable cost-based 

payment authorized by section 410A of 

Public Law 108–173. We refer readers to 

CMS Change Request 7505, dated July 

22, 2011, available on the CMS Web site 

at: http://www.cms.gov. Section 

1886(d)(12) of the Act provides for a 

payment adjustment to account for the 

higher costs per discharge for lowvolume hospitals under the IPPS, 

effective FY 2005 (69 FR 49099 through 

49102). We note that sections 3125 and 

10314 of the Affordable Care Act 

provided for temporary changes in the 

qualifying criteria and payment 

adjustment for low-volume hospitals for 

FYs 2011 and 2012, which were further 

extended by subsequent legislation 

through March 31, 2015 (79 FR 49998 

through 50001). These temporary 

changes increased the number of 

hospitals that are eligible to receive the 

low-volume hospital payment 

adjustment. 

To the extent a hospital would have 

received a low-volume hospital 

payment adjustment if it had not 

participated in the demonstration, we 

believe it would be reasonable to take 

this into account in future rulemaking 

in determining what the hospital would 

have otherwise been paid in an 

applicable year without the 

demonstration. Because this payment 

adjustment has not been factored into 

the estimation of payments that 

otherwise would have been paid under 

the demonstration, such a proposal 

would require detailed consideration of 

the data sources and methodology that 

would be used to determine which 

among the demonstration hospitals 

would have otherwise been eligible for 

the low-volume payment adjustment 

and to estimate the amount of the 

adjustment. We are inviting public 

comments on this issue. 

J. Proposed Changes to MS–DRGs 

Subject to the Postacute Care Transfer 

Policy (§ 412.4) 

1. Background 

Existing regulations at § 412.4(a) 

define discharges under the IPPS as 

situations in which a patient is formally 

released from an acute care hospital or 

dies in the hospital. Section 412.4(b) 

defines acute care transfers, and 

§ 412.4(c) defines postacute care 

transfers. Our policy set forth in 

§ 412.4(f) provides that when a patient 

is transferred and his or her length of 

stay is less than the geometric mean 

length of stay for the MS–DRG to which 

the case is assigned, the transferring 

hospital is generally paid based on a 

graduated per diem rate for each day of 

stay, not to exceed the full MS–DRG 

payment that would have been made if 

the patient had been discharged without 

being transferred. 

The per diem rate paid to a 

transferring hospital is calculated by 

dividing the full MS–DRG payment by 

the geometric mean length of stay for 

the MS–DRG. Based on an analysis that 

showed that the first day of 

hospitalization is the most expensive 

(60 FR 45804), our policy generally 

provides for payment that is twice the 

per diem amount for the first day, with 

each subsequent day paid at the per 

diem amount up to the full MS–DRG 

payment (§ 412.4(f)(1)). Transfer cases 

also are eligible for outlier payments. In 

general, the outlier threshold for transfer 

cases, as described in § 412.80(b), is 

equal to the fixed-loss outlier threshold 

for nontransfer cases (adjusted for 

geographic variations in costs), divided 

by the geometric mean length of stay for 

the MS–DRG, and multiplied by the 

length of stay for the case, plus 1 day. 

We established the criteria set forth in 

§ 412.4(d) for determining which DRGs 

qualify for postacute care transfer 

payments in the FY 2006 IPPS final rule 

(70 FR 47419 through 47420). The 

determination of whether a DRG is 

subject to the postacute care transfer 

policy was initially based on the 

Medicare Version 23.0 GROUPER (FY 

2006) and data from the FY 2004 


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MedPAR file. However, if a DRG did not 

exist in Version 23.0 or a DRG included 

in Version 23.0 is revised, we use the 

current version of the Medicare 

GROUPER and the most recent complete 

year of MedPAR data to determine if the 

DRG is subject to the postacute care 

transfer policy. Specifically, if the MS– 

DRG’s total number of discharges to 

postacute care equals or exceeds the 

55th percentile for all MS–DRGs and the 

proportion of short-stay discharges to 

postacute care to total discharges in the 

MS–DRG exceeds the 55th percentile for 

all MS–DRGs, CMS will apply the 

postacute care transfer policy to that 

MS–DRG and to any other MS–DRG that 

shares the same base MS–DRG. In the 

preamble to the FY 2006 IPPS final rule 

(70 FR 47419), we stated that we will 

not revise the list of DRGs subject to the 

postacute care transfer policy annually 

unless we are making a change to a 

specific DRG. 

To account for MS–DRGs subject to 

the postacute care policy that exhibit 

exceptionally higher shares of costs very 

early in the hospital stay, § 412.4(f) also 

includes a special payment 

methodology. For these MS–DRGs, 

hospitals receive 50 percent of the full 

MS–DRG payment, plus the single per 

diem payment, for the first day of the 

stay, as well as a per diem payment for 

subsequent days (up to the full MS–DRG 

payment (§ 412.4(f)(6)). For an MS–DRG 

to qualify for the special payment 

methodology, the geometric mean 

length of stay must be greater than 4 

days, and the average charges of 1-day 

discharge cases in the MS–DRG must be 

at least 50 percent of the average charges 

for all cases within the MS–DRG. MS– 

DRGs that are part of an MS–DRG 

severity level group will qualify under 

the MS–DRG special payment 

methodology policy if any one of the 

MS–DRGs that share that same base 

MS–DRG qualifies (§ 412.4(f)(6)). 

2. Proposed Changes to the Postacute 

Care Transfer MS–DRGs 

Based on our annual review of MS– 

DRGs, we have identified two proposed 

new MS–DRGs that we are proposing to 

include on the list of MS–DRGs subject 

to the postacute care transfer policy. As 

we discuss in section II.G. of the 

preamble of this proposed rule, in 

response to public comments and based 

on our analysis of FY 2014 MedPAR 

claims data, we are proposing to make 

changes to MS–DRGs, effective for FY 

2016. 

As discussed in section II.G.3.b. of the 

preamble of this proposed rule, we are 

proposing to modify the MS–DRG 

assignment of certain cardiovascular 

procedures currently assigned to MS– 

DRGs 246 (Percutaneous Cardiovascular 

Procedures with Drug-Eluting Stent 

with MCC or 4+ Vessels/Stents), 247 

(Percutaneous Cardiovascular 

Procedures with Drug-Eluting Stent 

without MCC), 248 (Percutaneous 

Cardiovascular Procedures with NonDrug Eluting Stent with MCC or 4+ 

Vessels/Stents), 249 (Percutaneous 

Cardiovascular Procedures with NonDrug Eluting Stent without MCC), 250 

(Percutaneous Cardiovascular 

Procedures without Coronary Artery 

Stent with MCC), and 251 (Percutaneous 

Cardiovascular Procedures without 

Coronary Artery Stent without MCC) to 

improve the clinical homogeneity of 

these MS–DRGs and reflect the resource 

cost of specialized equipment. We are 

proposing to create new MS–DRGs 273 

and 274 (Percutaneous Intracardiac 

Procedures with and without MCC, 

respectively) and to reassign the 

procedures performed within the heart 

chambers using intracardiac techniques 

from their current assignment in MS– 

DRGs 246 through 251 to the two 

proposed new MS–DRGs. 

To improve clinical coherence for the 

various cardiovascular procedures 

currently assigned to MS–DRGs 237 and 

238 (Major Cardiovascular Procedures 

with and without MCC, respectively), as 

discussed in section II.G.3.e. of the 

preamble of this proposed rule, we also 

are proposing to delete MS–DRGs 237 

and 238 and to create five new proposed 

MS–DRGs: Proposed new MS DRGs 268 

and 269 (Aortic and Heart Assist 

Procedures Except Pulsation Balloon 

with MCC and without MCC, 

respectively) would contain the more 

complex, more invasive aortic and heart 

assist procedures currently assigned to 

MS–DRGs 237 and 238. Proposed new 

MS–DRGs 270 (Other Major 

Cardiovascular Procedures with MCC), 

271 (Other Major Cardiovascular 

Procedures with CC), and 272 (Other 

Major Cardiovascular Procedures 

without CC/MCC) would include the 

less complex, less invasive 

cardiovascular procedures currently 

assigned to MS–DRGs 237 and 238. 

In light of these proposed changes to 

the MS–DRGs for FY 2016, according to 

the regulations under § 412.4(c), we 

evaluated these proposed MS–DRGs 

against the general postacute care 

transfer policy criteria using the FY 

2014 MedPAR data. If an MS–DRG 

qualified for the postacute care transfer 

policy, we also evaluated that MS–DRG 

under the special payment methodology 

criteria according to regulations at 

§ 412.4(f)(6). We continue to believe it is 

appropriate to reassess MS–DRGs when 

proposing reassignment of procedures 

and/or diagnostic codes that would 

result in material changes to an MS– 

DRG. As a result of our review, we are 

proposing to update the list of MS– 

DRGs that are subject to the postacute 

care transfer policy to include the 

proposed new MS–DRGs 273 and 274. 

Existing MS–DRGs 246 through 251 do 

not currently qualify for the postacute 

care transfer policy and would not meet 

the review criteria for FY 2016. 

Proposed new MS–DRGs 268 through 

272 also would not qualify for postacute 

care transfer policy status. 

PROPOSED LIST OF MS–DRGS SUBJECT TO REVIEW OF POSTACUTE CARE TRANSFER POLICY STATUS FOR FY 2016 

Proposed 

new 

MS–DRG 

Proposed MS–DRG title Total 

cases 

Postacute care 

transfers (55th 

percentile: 1,395) 

Short-stay 

postacute care 

transfers 

Percent of shortstay postacute 

care transfers to 

all cases (55th 

percentile: 

7.8005%) 

Postacute care 

transfer policy 

status 

268 ........... Aortic and Heart Assist Procedures Except Pulsation Balloon with MCC.4,464 2,178 268 * 6.0036 NO. 

269 ........... Aortic and Heart Assist Procedures Except Pulsation Balloon without MCC.19,382 3,617 0 * 0 NO. 

270 ........... Other Major Cardiovascular Procedures 

with MCC.

15,141 5,964 719 * 4.7487 NO. 

271 ........... Other Major Cardiovascular Procedures 

with CC.

10,368 4,027 532 * 5.1312 NO. 

272 ........... Other Major Cardiovascular Procedures 

without CC/MCC.

4,785 * 880 54 * 1.1285 NO. 


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PROPOSED LIST OF MS–DRGS SUBJECT TO REVIEW OF POSTACUTE CARE TRANSFER POLICY STATUS FOR FY 2016— 

Continued 

Proposed 

new 

MS–DRG 

Proposed MS–DRG title Total 

cases 

Postacute care 

transfers (55th 

percentile: 1,395) 

Short-stay 

postacute care 

transfers 

Percent of shortstay postacute 

care transfers to 

all cases (55th 

percentile: 

7.8005%) 

Postacute care 

transfer policy 

status 

273 ........... Percutaneous Intracardiac Procedures 

with MCC.

6,602 2,654 646 9.7849 YES. 

274 ........... Percutaneous Intracardiac Procedures 

without MCC.

15,812 2,445 140 * 0.8854 YES.** 

* Indicates a current postacute care transfer policy criterion that the MS–DRG did not meet. 

** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS–DRGs that share the same base MS–DRG will all qualify under the postacute 

care transfer policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. 

Finally, we have determined that 

proposed new MS–DRGs 273 and 274 

also would meet the criteria for the 

special payment methodology. 

Therefore, we are proposing that the two 

proposed new MS–DRGs would be 

subject to the MS–DRG special payment 

methodology, effective FY 2016. 

PROPOSED LIST OF MS–DRGS SUBJECT TO REVIEW OF SPECIAL PAYMENT POLICY FOR FY 2016 

Proposed 

new 

MS–DRG 

Proposed MS–DRG Title Geometric mean 

length of stay 

Average charges 

of 1-day 

discharges 

50 percent of 

average charges 

for all cases 

within MS–DRG 

Special 

payment policy 

status 

273 ........... Percutaneous Intracardiac Procedures with MCC ....... 6.0 $67,126 $60,588 YES. 

274 ........... Percutaneous Intracardiac Procedures without MCC .. 2.7 0 0 YES.* 

* As described in the policy at 42 CFR 412.4(d)(6)(iv), MS–DRGs that share the same base MS–DRG will all qualify under the MS–DRG special payment policy if any one of the MS–DRGs that share that same base MS–DRG qualifies. 

The proposed postacute care transfer 

status and special payment policy status 

of these MS–DRGs are reflected in Table 

5 associated with this proposed rule, 

which is listed in section VI. of the 

Addendum to this proposed rule and 

available via the Internet on the CMS 

Web site. 

K. Short Inpatient Hospital Stays 

Over the past few years, stakeholders 

have expressed a variety of concerns 

related to Medicare policies on short 

inpatient hospital stays, long outpatient 

stays that include observation services, 

and Medicare policies with respect to 

when payment for short hospital stays is 

appropriate under Medicare Part A. 

CMS has taken steps to address such 

concerns. As we announced on April 1, 

2015, CMS recovery auditors are not 

permitted to conduct patient status 

reviews for claims with dates of 

admission of October 1, 2013 through 

April 30, 2015. 

In addition, on December 30, 2014, 

we announced a number of changes to 

the Recovery Audit Program. Such 

modifications included changing the 

recovery auditor ‘‘look-back period’’ for 

patient status reviews to 6 months from 

the date of service in cases where a 

hospital submits the claim within 3 

months of the date that it provides the 

service. Several other program 

improvements were included in this 

announcement. We have established 

limits on additional documentation 

requests (ADRs) that are based on a 

hospital’s compliance with Medicare 

rules, incrementally applied ADR limits 

for providers that are new to recovery 

auditor reviews, and diversified ADR 

limits across all types of claims for a 

certain provider. We also have 

established a requirement that recovery 

auditors must complete complex 

reviews within 30 days, and failure to 

do so will result in the loss of the 

recovery auditor’s contingency fee. In 

addition, we will require recovery 

auditors to wait 30 days before sending 

a claim to the MAC for adjustment. This 

30-day period will allow the provider to 

submit a discussion period request 

before the MAC makes any payment 

adjustments. These changes will be 

effective with the next Recovery Audit 

Program contract awards. 

Despite these planned alterations to 

the Recovery Audit Program, we note 

that hospitals and physicians continue 

to voice their concern with parts of the 

2-midnight rule finalized in the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50943 

through 50954). Therefore, we are 

considering this feedback carefully, as 

well as recent MedPAC 

recommendations, and expect to 

include a further discussion of the 

broader set of issues related to short 

inpatient hospital stays, long outpatient 

stays with observation services, and the 

related -0.2 percent IPPS payment 

adjustment in the CY 2016 hospital 

outpatient prospective payment system 

proposed rule that will be published 

this summer. 

V. Proposed Changes to the IPPS for 

Capital-Related Costs 

A. Overview 

Section 1886(g) of the Act requires the 

Secretary to pay for the capital-related 

costs of inpatient acute hospital services 

‘‘in accordance with a prospective 

payment system established by the 

Secretary.’’ Under the statute, the 

Secretary has broad authority in 

establishing and implementing the IPPS 

for acute care hospital inpatient capitalrelated costs. The IPPS for capitalrelated costs was initially implemented 

in the Federal fiscal year (FY) 1992 IPPS 

final rule (56 FR 43358), in which we 

established a 10-year transition period 

to change the payment methodology for 

Medicare hospital inpatient capitalrelated costs from a reasonable costbased methodology to a prospective 

methodology (based fully on the Federal 

rate). 

FY 2001 was the last year of the 10- 

year transition period established to 

phase in the IPPS for hospital inpatient 


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capital-related costs. For cost reporting 

periods beginning in FY 2002, capital 

IPPS payments are based solely on the 

Federal rate for almost all acute care 

hospitals (other than hospitals receiving 

certain exception payments and certain 

new hospitals). (We refer readers to the 

FY 2002 IPPS final rule (66 FR 39910 

through 39914) for additional 

information on the methodology used to 

determine capital IPPS payments to 

hospitals both during and after the 

transition period.) 

The basic methodology for 

determining capital prospective 

payments using the Federal rate is set 

forth in § 412.312 of the regulations. For 

the purpose of calculating capital 

payments for each discharge, the 

standard Federal rate is adjusted as 

follows: 

(Standard Federal Rate) × (DRG 

Weight) × (Geographic Adjustment 

Factor (GAF)) × (COLA for hospitals 

located in Alaska and Hawaii) × (1 + 

Capital DSH Adjustment Factor + 

Capital IME Adjustment Factor, if 

applicable). 

In addition, under § 412.312(c), 

hospitals also may receive outlier 

payments under the capital IPPS for 

extraordinarily high-cost cases that 

qualify under the thresholds established 

for each fiscal year. 

B. Additional Provisions 

1. Exception Payments 

The regulations at § 412.348 provide 

for certain exception payments under 

the capital IPPS. The regular exception 

payments provided under § 412.348(b) 

through (e) were available only during 

the 10-year transition period. For a 

certain period after the transition 

period, eligible hospitals may have 

received additional payments under the 

special exceptions provisions at 

§ 412.348(g). However, FY 2012 was the 

final year hospitals could receive 

special exceptions payments. For 

additional details regarding these 

exceptions policies, we refer readers to 

the FY 2012 IPPS/LTCH PPS final rule 

(76 FR 51725). 

Under § 412.348(f), a hospital may 

request an additional payment if the 

hospital incurs unanticipated capital 

expenditures in excess of $5 million due 

to extraordinary circumstances beyond 

the hospital’s control. Additional 

information on the exception payment 

for extraordinary circumstances in 

§ 412.348(f) can be found in the FY 2005 

IPPS final rule (69 FR 49185 and 49186). 

2. New Hospitals 

Under the capital IPPS, § 412.300(b) 

of the regulations defines a new hospital 

as a hospital that has operated (under 

previous or current ownership) for less 

than 2 years and lists examples of 

hospitals that are not considered new 

hospitals. In accordance with 

§ 412.304(c)(2), under the capital IPPS a 

new hospital is paid 85 percent of its 

allowable Medicare inpatient hospital 

capital-related costs through its first 2 

years of operation, unless the new 

hospital elects to receive full 

prospective payment based on 100 

percent of the Federal rate. We refer 

readers to the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51725) for additional 

information on payments to new 

hospitals under the capital IPPS. 

3. Hospitals Located in Puerto Rico 

Section 412.374 of the regulations 

provides for the use of a blended 

payment amount for prospective 

payments for capital-related costs to 

hospitals located in Puerto Rico. 

Accordingly, under the capital IPPS, we 

compute a separate payment rate 

specific to Puerto Rico hospitals using 

the same methodology used to compute 

the national Federal rate for capitalrelated costs. In general, hospitals 

located in Puerto Rico are paid a blend 

of the applicable capital IPPS Puerto 

Rico rate and the applicable capital IPPS 

Federal rate. Capital IPPS payments to 

hospitals located in Puerto Rico are 

computed based on a blend of 25 

percent of the capital IPPS Puerto Rico 

rate and 75 percent of the capital IPPS 

Federal rate. For additional details on 

capital IPPS payments to hospitals 

located in Puerto Rico, we refer readers 

to the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51725). 

C. Proposed Annual Update for FY 2016 

The proposed annual update to the 

capital PPS Federal and Puerto Ricospecific rates, as provided for at 

§ 412.308(c), for FY 2016 is discussed in 

section III. of the Addendum to this 

proposed rule. 

We note that, in section II.D. of the 

preamble of this proposed rule, we 

present a discussion of the MS–DRG 

documentation and coding adjustment, 

including previously finalized policies 

and historical adjustments, as well as 

the recoupment adjustment to the 

standardized amounts under section 

1886(d) of the Act that we are proposing 

for FY 2016 in accordance with the 

amendments made to section 7(b)(1)(B) 

of Public Law 110–90 by section 631 of 

the ATRA. Because section 631 of the 

ATRA requires CMS to make a 

recoupment adjustment only to the 

operating IPPS standardized amount, we 

are not proposing a similar adjustment 

to the national or Puerto Rico capital 

IPPS rates (or to the operating IPPS 

hospital-specific rates or the Puerto 

Rico-specific standardized amount). 

This approach is consistent with our 

historical approach regarding the 

application of the recoupment 

adjustment authorized by section 

7(b)(1)(B) of Public Law 110–90. 

VI. Proposed Changes for Hospitals 

Excluded From the IPPS 

Certain hospitals excluded from a 

prospective payment system, including 

children’s hospitals, 11 cancer 

hospitals, and hospitals located outside 

the 50 States, the District of Columbia, 

and Puerto Rico (that is, hospitals 

located in the U.S. Virgin Islands, 

Guam, the Northern Mariana Islands, 

and American Samoa) receive payment 

for inpatient hospital services they 

furnish on the basis of reasonable costs, 

subject to a rate-of-increase ceiling. A 

per discharge limit (the target amount as 

defined in § 413.40(a) of the regulations) 

is set for each hospital based on the 

hospital’s own cost experience in its 

base year, and updated annually by a 

rate-of-increase percentage. For each 

cost reporting period, the updated target 

amount is multiplied by total Medicare 

discharges during that period and 

applies as an aggregate upper limit (the 

ceiling as defined in § 413.40(a)) of 

Medicare reimbursement for total 

inpatient operating costs for a hospital’s 

cost reporting period. In accordance 

with § 403.752(a) of the regulations, 

RNHCIs also are subject to the rate-ofincrease limits established under 

§ 413.40 of the regulations discussed 

above. 

As explained in the FY 2006 IPPS 

final rule (70 FR 47396 through 47398), 

beginning with FY 2006, we have used 

the percentage increase in the IPPS 

operating market basket to update the 

target amounts for children’s hospitals, 

cancer hospitals, and RNHCIs. 

Consistent with §§ 412.23(g), 

413.40(a)(2)(ii)(A), and 

413.40(c)(3)(viii), we also have used the 

percentage increase in the IPPS 

operating market basket to update the 

target amounts for short-term acute care 

hospitals located in the U.S. Virgin 

Islands, Guam, the Northern Mariana 

Islands, and American Samoa. As we 

finalized in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50156 through 

50157), we will continue to use the 

percentage increase in the FY 2010- 

based IPPS operating market basket to 

update the target amounts for children’s 

hospitals, cancer hospitals, RNHCIs, and 

short-term acute care hospitals located 

in the U.S. Virgin Islands, Guam, the 

Northern Mariana Islands, and 

American Samoa for FY 2016 and 


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subsequent fiscal years. Accordingly, for 

FY 2016, the rate-of-increase percentage 

to be applied to the target amount for 

these children’s hospitals, cancer 

hospitals, RNHCIs, and short-term acute 

care hospitals located in the U.S. Virgin 

Islands, Guam, the Northern Mariana 

Islands, and American Samoa is the FY 

2016 percentage increase in the FY 

2010-based IPPS operating market 

basket. 

For this FY 2016 proposed rule, based 

on IHS Global Insight, Inc.’s 2015 first 

quarter forecast, we estimate that the FY 

2010-based IPPS operating market 

basket update for FY 2016 is 2.7 percent 

(that is, the estimate of the market 

basket rate-of-increase). Therefore, the 

FY 2016 rate-of-increase percentage that 

would be applied to the FY 2015 target 

amounts in order to calculate the FY 

2016 target amounts for children’s 

hospitals, cancer hospitals, RNHCIs, and 

short-term acute care hospitals located 

in the U.S. Virgin Islands, Guam, the 

Northern Mariana Islands, and 

American Samoa is 2.7 percent, in 

accordance with the applicable 

regulations at 42 CFR 413.40. We are 

proposing that if more recent data 

become available for the final rule, we 

would use them to calculate the IPPS 

operating market basket update for FY 

2016. 

VII. Proposed Changes to the LongTerm Care Hospital Prospective 

Payment System (LTCH PPS) for FY 

2016 

A. Background of the LTCH PPS 

1. Legislative and Regulatory Authority 

Section 123 of the Medicare, 

Medicaid, and SCHIP (State Children’s 

Health Insurance Program) Balanced 

Budget Refinement Act of 1999 (BBRA) 

(Pub. L. 106–113) as amended by 

section 307(b) of the Medicare, 

Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 

2000 (BIPA) (Pub. L. 106–554) provides 

for payment for both the operating and 

capital-related costs of hospital 

inpatient stays in long-term care 

hospitals (LTCHs) under Medicare Part 

A based on prospectively set rates. The 

Medicare prospective payment system 

(PPS) for LTCHs applies to hospitals 

that are described in section 

1886(d)(1)(B)(iv) of the Act, effective for 

cost reporting periods beginning on or 

after October 1, 2002. 

Section 1886(d)(1)(B)(iv)(I) of the Act 

defines a LTCH as ‘‘a hospital which has 

an average inpatient length of stay (as 

determined by the Secretary) of greater 

than 25 days.’’ Section 

1886(d)(1)(B)(iv)(II) of the Act also 

provides an alternative definition of 

LTCHs: Specifically, a hospital that first 

received payment under section 1886(d) 

of the Act in 1986 and has an average 

inpatient length of stay (LOS) (as 

determined by the Secretary of Health 

and Human Services (the Secretary)) of 

greater than 20 days and has 80 percent 

or more of its annual Medicare inpatient 

discharges with a principal diagnosis 

that reflects a finding of neoplastic 

disease in the 12-month cost reporting 

period ending in FY 1997. 

Section 123 of the BBRA requires the 

PPS for LTCHs to be a ‘‘per discharge’’ 

system with a diagnosis-related group 

(DRG) based patient classification 

system that reflects the differences in 

patient resources and costs in LTCHs. 

Section 307(b)(1) of the BIPA, among 

other things, mandates that the 

Secretary shall examine, and may 

provide for, adjustments to payments 

under the LTCH PPS, including 

adjustments to DRG weights, area wage 

adjustments, geographic reclassification, 

outliers, updates, and a disproportionate 

share adjustment. 

In the August 30, 2002 Federal 

Register, we issued a final rule that 

implemented the LTCH PPS authorized 

under the BBRA and BIPA (67 FR 

55954). For the initial implementation 

of the LTCH PPS (FYs 2003 through FY 

2007), the system used information from 

LTCH patient records to classify 

patients into distinct long-term care 

diagnosis-related groups (LTC–DRGs) 

based on clinical characteristics and 

expected resource needs. Beginning in 

FY 2008, we adopted the Medicare 

severity long-term care diagnosis-related 

groups (MS–LTC–DRGs) as the patient 

classification system used under the 

LTCH PPS. Payments are calculated for 

each MS–LTC–DRG and provisions are 

made for appropriate payment 

adjustments. Payment rates under the 

LTCH PPS are updated annually and 

published in the Federal Register. 

The LTCH PPS replaced the 

reasonable cost-based payment system 

under the Tax Equity and Fiscal 

Responsibility Act of 1982 (TEFRA) 

(Pub. L. 97–248) for payments for 

inpatient services provided by a LTCH 

with a cost reporting period beginning 

on or after October 1, 2002. (The 

regulations implementing the TEFRA 

reasonable cost-based payment 

provisions are located at 42 CFR part 

413.) With the implementation of the 

PPS for acute care hospitals authorized 

by the Social Security Amendments of 

1983 (Pub. L. 98–21), which added 

section 1886(d) to the Act, certain 

hospitals, including LTCHs, were 

excluded from the PPS for acute care 

hospitals and were paid their reasonable 

costs for inpatient services subject to a 

per discharge limitation or target 

amount under the TEFRA system. For 

each cost reporting period, a hospitalspecific ceiling on payments was 

determined by multiplying the 

hospital’s updated target amount by the 

number of total current year Medicare 

discharges. (Generally, in this section 

VII. of the preamble of this proposed 

rule, when we refer to discharges, we 

describe Medicare discharges.) The 

August 30, 2002 final rule further 

details the payment policy under the 

TEFRA system (67 FR 55954). 

In the August 30, 2002 final rule, we 

provided for a 5-year transition period 

from payments under the TEFRA system 

to payments under the LTCH PPS. 

During this 5-year transition period, a 

LTCH’s total payment under the PPS 

was based on an increasing percentage 

of the Federal rate with a corresponding 

decrease in the percentage of the LTCH 

PPS payment that is based on 

reasonable cost concepts, unless a LTCH 

made a one-time election to be paid 

based on 100 percent of the Federal rate. 

Beginning with LTCHs’ cost reporting 

periods beginning on or after October 1, 

2006, total LTCH PPS payments are 

based on 100 percent of the Federal rate. 

In addition, in the August 30, 2002 

final rule, we presented an in-depth 

discussion of the LTCH PPS, including 

the patient classification system, 

relative weights, payment rates, 

additional payments, and the budget 

neutrality requirements mandated by 

section 123 of the BBRA. The same final 

rule that established regulations for the 

LTCH PPS under 42 CFR part 412, 

subpart O, also contained LTCH 

provisions related to covered inpatient 

services, limitation on charges to 

beneficiaries, medical review 

requirements, furnishing of inpatient 

hospital services directly or under 

arrangement, and reporting and 

recordkeeping requirements. We refer 

readers to the August 30, 2002 final rule 

for a comprehensive discussion of the 

research and data that supported the 

establishment of the LTCH PPS (67 FR 

55954). 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51733 

through 51743) for a chronological 

summary of the main legislative and 

regulatory developments affecting the 

LTCH PPS through the annual update 

cycles prior to the FY 2014 rulemaking 

cycle. In addition, in this proposed rule, 

we discuss the provisions of the 

Pathway for SGR Reform Act of 2013 

(Pub. L. 113–67), enacted on December 

26, 2013, and the Protecting Access to 

Medicare Act of 2014 (PAMA) (Pub. L. 

113–97), enacted on March 27, 2014, 

both of which affect the LTCH 


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PPS. In section VII.B. of the preamble of 

this proposed rule, we discuss our 

proposals to implement the provisions 

of section 1206(a) of Public Law 113–67, 

which amended section 1886(m) of the 

Act by adding paragraph (6) and 

established, among other things, patientlevel criteria for payments under the 

LTCH PPS for implementation 

beginning with FY 2016, and our 

proposed changes to the calculation of 

the greater than 25-day average length of 

stay criteria, consistent with the statute, 

in section VII.F. of the preamble of this 

proposed rule. In section VII.E. of the 

preamble of this proposed rule, we are 

proposing technical clarifications 

relating to our implementation of the 

new statutory moratoria on the 

establishment of new LTCHs and LTCH 

satellite facilities (subject to certain 

defined exceptions) and the new 

statutory moratorium on bed increases 

in existing LTCHs under section 

1206(b)(2) of Public Law 113–67, as 

amended. 

2. Criteria for Classification as an LTCH 

a. Classification as an LTCH 

Under the regulations at 

§ 412.23(e)(1), to qualify to be paid 

under the LTCH PPS, a hospital must 

have a provider agreement with 

Medicare. Furthermore, § 412.23(e)(2)(i), 

which implements section 

1886(d)(1)(B)(iv)(I) of the Act, requires 

that a hospital have an average Medicare 

inpatient length of stay of greater than 

25 days to be paid under the LTCH PPS. 

Alternatively, § 412.23(e)(2)(ii) states 

that, for cost reporting periods 

beginning on or after August 5, 1997, a 

hospital that was first excluded from the 

PPS in 1986 and can demonstrate that 

at least 80 percent of its annual 

Medicare inpatient discharges in the 12- 

month cost reporting period ending in 

FY 1997 have a principal diagnosis that 

reflects a finding of neoplastic disease 

must have an average inpatient length of 

stay for all patients, including both 

Medicare and non-Medicare inpatients, 

of greater than 20 days. 

b. Hospitals Excluded From the LTCH 

PPS 

The following hospitals are paid 

under special payment provisions, as 

described in § 412.22(c) and, therefore, 

are not subject to the LTCH PPS rules: 

• Veterans Administration hospitals. 

• Hospitals that are reimbursed under 

State cost control systems approved 

under 42 CFR part 403. 

• Hospitals that are reimbursed in 

accordance with demonstration projects 

authorized under section 402(a) of the 

Social Security Amendments of 1967 

(Pub. L. 90–248) (42 U.S.C. 1395b–1) or 

section 222(a) of the Social Security 

Amendments of 1972 (Pub. L. 92–603) 

(42 U.S.C. 1395b–1 (note)) (Statewide 

all-payer systems, subject to the rate-ofincrease test at section 1814(b) of the 

Act). 

• Nonparticipating hospitals 

furnishing emergency services to 

Medicare beneficiaries. 

3. Limitation on Charges to Beneficiaries 

In the August 30, 2002 final rule, we 

presented an in-depth discussion of 

beneficiary liability under the LTCH 

PPS (67 FR 55974 through 55975). This 

discussion was further clarified in the 

RY 2005 LTCH PPS final rule (69 FR 

25676). In keeping with those 

discussions, if the Medicare payment to 

the LTCH is the full LTC–DRG payment 

amount, consistent with other 

established hospital prospective 

payment systems, § 412.507 currently 

provides that an LTCH may not bill a 

Medicare beneficiary for more than the 

deductible and coinsurance amounts as 

specified under §§ 409.82, 409.83, and 

409.87 and for items and services 

specified under § 489.30(a). However, 

under the LTCH PPS, Medicare will 

only pay for days for which the 

beneficiary has coverage until the shortstay outlier (SSO) threshold is exceeded. 

If the Medicare payment was for a SSO 

case (§ 412.529), and that payment was 

less than the full LTC–DRG payment 

amount because the beneficiary had 

insufficient remaining Medicare days, 

the LTCH is currently also permitted to 

charge the beneficiary for services 

delivered on those uncovered days 

(§ 412.507). In light of our proposed 

implementation of section 1206(a) of 

Public Law 113–67, we now need to 

also address beneficiary charges in the 

context of the new site neutral payment 

rate. Therefore, in section VII.B.7.c. of 

the preamble of this proposed rule, we 

are proposing to amend the existing 

regulations relating to the limitation on 

charges to address beneficiary charges 

under this new LTCH PPS payment rate. 

4. Administrative Simplification 

Compliance Act (ASCA) and Health 

Insurance Portability and 

Accountability Act (HIPAA) 

Compliance 

Claims submitted to Medicare must 

comply with both the Administrative 

Simplification Compliance Act (ASCA) 

(Pub. L. 107–105), and the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

(Pub. L. 104–191). Section 3 of the 

ASCA requires that the Medicare 

Program deny payment under Part A or 

Part B for any expenses incurred for 

items or services ‘‘for which a claim is 

submitted other than in an electronic 

form specified by the Secretary.’’ 

Section 1862(h) of the Act (as added by 

section 3(a) of the ASCA) provides that 

the Secretary shall waive such denial in 

two specific types of cases and may also 

waive such denial ‘‘in such unusual 

cases as the Secretary finds appropriate’’ 

(68 FR 48805). Section 3 of the ASCA 

operates in the context of the HIPAA 

regulations, which include, among other 

provisions, the transactions and code 

sets standards requirements codified 

under 45 CFR parts 160 and 162 

(generally known as the Transactions 

Rule). The Transactions Rule requires 

covered entities, including covered 

health care providers, to conduct certain 

electronic health care transactions 

according to the applicable transactions 

and code sets standards. 

The Department of Health and Human 

Services (HHS) has a number of 

initiatives designed to encourage and 

support the adoption of health 

information technology and promote 

nationwide health information exchange 

to improve health care. The Office of the 

National Coordinator for Health 

Information Technology (ONC) leads 

these efforts in collaboration with other 

agencies, including CMS and the Office 

of the Assistant Secretary for Planning 

and Evaluation (ASPE). Through a 

number of activities, including several 

open government initiatives, HHS is 

promoting the adoption of electronic 

health record (EHR) technology certified 

under the ONC Health Information 

Technology (HIT) Certification Program 

developed to support secure, 

interoperable, health information 

exchange. The HIT Policy Committee (a 

Federal Advisory Committee) has 

recommended areas in which HIT 

certification under the ONC HIT 

Certification Program would help 

support providers that are eligible for 

the Medicare and Medicaid EHR 

Incentive Programs, such as long-term 

care and postacute care hospitals and 

behavioral health care providers. We 

believe that the use of certified EHRs by 

LTCHs (and other types of providers 

that are ineligible for the Medicare and 

Medicaid EHR Incentive Programs) can 

effectively and efficiently help 

providers improve internal care delivery 

practices, support the exchange of 

important information across care 

partners and during transitions of care, 

and could enable the reporting of 

electronically specified clinical quality 

measures (eCQMs) (as described 

elsewhere in this proposed rule). More 

information on the ONC HIT 

Certification Program and efforts to 


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develop standards applicable to LTCHs 

can be found by accessing the following 

Web sites and resources: 

• http://www.healthit.gov/sites/

default/files/

generalcertexchangeguidance_final_9-9- 

13.pdf; 

• http://www.healthit.gov/facas/

FACAS/health-it-policy-committee/

hitpc-workgroups/certificationadoption; 

• http://wiki.siframework.org/

LCC+LTPAC+Care+Transition+SWG; 

and 

• http://wiki.siframework.org/

Longitudinal+Coordination+of+Care. 

B. Proposed Application of the Site 

Neutral Payment Rate (Proposed New 

§ 412.522) 

1. Overview 

Section 1206 of Public Law 113–67 

mandates significant changes to the 

payment system for LTCHs beginning 

with LTCH discharges occurring in cost 

reporting periods beginning on or after 

October 1, 2015. Under the current 

LTCH PPS, all discharges are paid under 

the LTCH PPS standard Federal 

payment rate (that is, payments 

calculated under the existing 

regulations, including adjustments, in 

Subpart O of 42 CFR part 412). Section 

1206 requires the establishment of an 

alternate ‘‘site neutral’’ payment rate for 

Medicare inpatient discharges from an 

LTCH that fail to meet certain statutorily 

defined criteria. Discharges that meet 

the criteria will continue to be paid the 

LTCH PPS standard Federal payment 

rate. Discharges that do not meet the 

statutory criteria will be paid at a new 

site neutral payment rate, as described 

below. We note that, for the remainder 

of this section, the phrase ‘‘LTCH PPS 

standard Federal payment rate case’’ 

refers to a LTCH PPS case that meets the 

criteria for exclusion from the site 

neutral payment rate under section 

1886(m)(6)(A)(ii) of the Act as discussed 

in section VII.B.3. of the preamble of 

this proposed rule, and the phrase ‘‘site 

neutral payment rate case’’ refers to a 

LTCH PPS case that does not meet the 

statutory patient-level criteria and, 

therefore, will be paid the applicable 

site neutral payment rate in accordance 

with section 1886(m)(6)(A)(i) of the Act, 

as discussed in section VII.B.4. of the 

preamble of this proposed rule. 

Under section 1886(m)(6)(A) of the 

Act as added by section 1206(a) of 

Public Law 113–67, beginning in cost 

reporting periods starting on or after 

October 1, 2015, all LTCH discharges 

are paid according to the site neutral 

payment rate unless certain criteria are 

met. For LTCH cases that meet the 

criteria for exclusion, the site neutral 

payment rate does not apply and 

payment will be made without regard to 

the provisions of section 1886(m)(6) of 

the Act. For cases that meet the criteria 

for exclusion from the site neutral 

payment rate, payment will continue to 

be based on the LTCH PPS standard 

Federal payment rate as determined in 

§ 412.523. As discussed in section 

VII.B.3. of the preamble of this proposed 

rule, under section 1886(m)(6)(A)(ii) of 

the Act, the criteria for exclusion from 

the site neutral payment rate are: (1) The 

discharge from the LTCH does not have 

a principal diagnosis relating to a 

psychiatric diagnosis or to 

rehabilitation; (2) admission to the 

LTCH was immediately preceded by 

discharge from a subsection (d) hospital; 

and (3) the immediately preceding stay 

in a subsection (d) hospital included at 

least 3 days in an intensive care unit 

(ICU) (referred to in this proposed rule 

as the ICU criterion) or the discharge 

from the LTCH is assigned to a MS– 

LTC–DRG based on the patient’s receipt 

of ventilator services of at least 96 hours 

(referred to in this proposed rule as the 

ventilator criterion). 

In this section of the proposed rule, 

we discuss our proposals to implement 

the required changes to the LTCH PPS 

payment rate, as well as other related 

policy proposals in accordance with 

section 1206(a) of Public Law 113–67 

under the broad authority of section 

123(a)(1) of the BBRA, as amended by 

section 307(b) of the BIPA. 

2. Proposed Application of the Site 

Neutral Payment Rate Under the LTCH 

PPS 

For FY 2016, we are proposing to add 

a new section to the regulations under 

42 CFR part 412 Subpart O (proposed 

new § 412.522) to establish the site 

neutral payment rate required by section 

1886(m)(6) of the Act as added by 

section 1206(a)(1) of Public Law 113–67. 

Specifically, section 1886(m)(6) of the 

Act requires that, beginning in cost 

reporting periods occurring on or after 

October 1, 2015, all LTCH discharges 

will be paid under the site neutral 

payment rate unless certain criteria are 

met. All LTCH discharges that meet the 

criteria for exclusion from the site 

neutral payment rate will continue to be 

paid the LTCH PPS standard Federal 

payment rate. Accordingly, in this 

proposed rule, under the broad 

authority of section 123(a)(1) of the 

BBRA, as amended by section 307(b) of 

the BIPA and in accordance with 

section 1206(a) of Public Law 113–67, 

we are proposing to implement the 

statutory criteria for excluding cases 

from the site neutral payment rate under 

proposed new § 412.522(b), as well as 

establish the requirements for 

determining the site neutral payment 

rate for a given LTCH discharge under 

proposed new § 412.522(c). In addition, 

we are proposing to make conforming 

changes to paragraph (a)(2) of § 412.521 

to include the new site neutral payment 

rate established in accordance with 

proposed new § 412.522 as a method of 

payment under the LTCH PPS. We also 

are proposing a technical change to the 

language in § 412.521(a)(2) that 

currently refers to the Federal payment 

rate by changing the term from ‘‘Federal 

payment rate’’ to ‘‘standard Federal 

payment rate’’ in order to provide 

consistent terminology when referring 

to such a payment. 

3. Criteria for Exclusion From the Site 

Neutral Payment Rate 

a. Statutory Provisions 

As stated earlier, section 1206(a) of 

Public Law 113–67 amended section 

1886(m) of the Act by adding paragraph 

(6), which specifies that beginning in 

cost reporting periods starting on or 

after October 1, 2015, all LTCH PPS 

discharges are paid according to the site 

neutral payment rate unless certain 

criteria are met. In general, under 

section 1886(m)(6)(A)(ii) of the Act, the 

criteria for exclusion from the site 

neutral payment rate are: the discharge 

from the LTCH does not have a 

principal diagnosis relating to a 

psychiatric diagnosis or to 

rehabilitation; admission to the LTCH 

was immediately preceded by discharge 

from a subsection (d) hospital; and the 

immediately preceding stay in a 

subsection (d) hospital included at least 

3 days in an intensive care unit (ICU) 

(referred to in this proposed rule as the 

ICU criterion) or the discharge from the 

LTCH is assigned to an MS–LTC–DRG 

based on the patient’s receipt of 

ventilator services of at least 96 hours 

(referred to in this proposed rule as the 

ventilator criterion). Below we present 

our proposals to implement the 

statutory criteria for exclusion from the 

site neutral payment rate under sections 

1886(m)(6)(A)(ii)(I) and (II) of the Act. b. 

Proposed Implementation of the 

Criterion for a Principal Diagnosis 

Relating to a Psychiatric Diagnosis or to 

Rehabilitation 

Section 1886(m)(6)(A)(ii)(II) of the Act 

specifies that in order for an LTCH 

discharge to be excluded from payment 

under the site neutral payment rate, the 

LTCH discharge cannot have a principal 

diagnosis relating to a psychiatric 

diagnosis or to rehabilitation. To 

implement this criterion, under the 

broad authority of section 123(a)(1) of 

the BBRA, as amended by section 307(b) 


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of the BIPA and in accordance with 

section 1206(a) of Public Law 113–67, 

we are proposing to identify cases with 

a principal diagnosis relating to a 

psychiatric diagnosis or to rehabilitation 

using specific MS–LTC–DRGs that we 

believe indicate such principal 

diagnoses. We are inviting public 

comments on our proposal to identify 

these cases using specific MS–LTC– 

DRGs that we believe indicate such 

principal diagnoses, including the 

specific MS–LTC–DRGs presented 

under this proposed approach. 

As discussed in section VII.C.2. of the 

preamble of this proposed rule, the MS– 

LTC–DRG patient classifications are, by 

extension, the same as the MS–DRG 

patient classifications used under the 

IPPS. The process of developing the 

MS–DRGs, and by extension the MS– 

LTC–DRGs, began by dividing all 

possible principal diagnoses into 

mutually exclusive principal diagnosis 

areas, referred to as Major Diagnostic 

Categories (MDCs). In general, a case is 

assigned to an MDC based on the 

patient’s principal diagnosis before the 

case is assigned to an MS–DRG. Once 

the MDCs were defined, each MDC was 

evaluated to identify which patient 

characteristics would be expected to 

result in similar hospital resource 

consumption. Because the presence of a 

surgical procedure that required the use 

of the operating room would have a 

significant effect on the type of hospital 

resources used to treat a patient, most 

MDCs were initially divided into 

surgical DRGs and medical DRGs. Some 

surgical and medical DRGs were further 

differentiated based on the presence or 

absence of a complication or 

comorbidity (CC) or a major 

complication or comorbidity (MCC). 

(For additional information and details 

on the development of the MS–DRG 

classifications, we refer readers to the 

FY 2010 IPPS/LTCH PPS final rule (74 

FR 43764 through 43765).) 

As such, Medicare LTCH discharges 

are classified into MS–LTC–DRGs based 

primarily on the patient’s principal 

diagnosis, as well as up to 24 additional 

diagnoses, and up to 25 procedures 

performed during the LTCH stay. 

Within a small number of MS–LTC– 

DRGs, classification is also based on the 

patient’s age, sex, and discharge status. 

The diagnosis and procedure 

information is currently reported by the 

hospital using codes from the ICD–9– 

CM coding system. For FY 2015, the 

MS–DRGs Version 32 are being used 

under the IPPS and the MS–LTC–DRGs 

Version 32 are being used under the 

LTCH PPS, which are based on ICD–9– 

CM codes. However, hospitals are 

required to use the ICD–10–CM/PCS 

coding system beginning October 1, 

2015. As discussed in section II.G.1.a. of 

the preamble of this proposed rule, the 

anticipated transition to ICD–10 

necessitated the development of an 

ICD–10–CM/PCS version of the MS– 

DRGs. To this end, CMS undertook a 

variety of activities, including a project 

to convert the ICD–9-based MS–DRGs to 

ICD–10 MS–DRGs using the General 

Equivalence Mappings (GEMs). The 

GEMs provide a map between ICD–9– 

CM and ICD–10 codes (78 FR 50549). 

For additional details on the various 

efforts taken by CMS in preparation for 

the transition from ICD–9–CM to ICD– 

10–CM/PCS, we refer readers to section 

II.G.1. of the preamble of this proposed 

rule or the CMS Web site at: http://

www.cms.gov/Medicare/Coding/ICD10/

index.html. 

For FY 2016, we are proposing to use 

the ICD–10 MS–DRGs Version 33 under 

the IPPS and the ICD–10 MS–LTC– 

DRGs Version 33 under the LTCH PPS. 

Specifically, as discussed in section 

II.G.1.b. of the preamble of this 

proposed rule, we are proposing the 

ICD–10 MS–DRGs Version 33 as the 

replacement logic for the ICD–9–based 

MS–DRGs Version 32 as part of the 

proposed MS–DRG updates (and by 

extension the MS–LTC–DRG updates, as 

discussed in section VII.C.2. of the 

preamble of this proposed rule) for FY 

2016. We are inviting public comments 

on how well the ICD–10 MS–DRGs 

Version 32 (and by extension MS–LTC– 

DRGs Version 32) replicates the logic of 

the MS–DRGs Version 32 (and by 

extension MS–LTC–DRGs Version 32) 

based on ICD–9–CM codes. In addition, 

we are inviting public comments on the 

translations from ICD–9–CM to ICD–10– 

CM/PCS with regard to our proposal to 

identify LTCH discharges with a 

principal diagnosis relating to a 

psychiatric diagnosis or to rehabilitation 

using specific ICD–10 MS–LTC–DRGs 

that we believe indicate such principal 

diagnoses, particularly the validity of 

the specific MS–LTC–DRGs listed under 

this proposed approach discussed below 

in this section. (We note that, for the 

remainder of the section, when we refer 

to MS–DRGs Version 33 (or by 

extension MS–LTC–DRGs), we are 

referring to the ICD–10-based MS–DRGs 

Version 33 (and by extension MS–LTC– 

DRGs), unless otherwise stated. 

Similarly, when we refer to MS–DRGs 

Version 32 (or by extension MS–LTC– 

DRGs), we are referring to the ICD–9- 

based MS–DRGs Version 32 (and by 

extension MS–LTC–DRGs), unless 

otherwise stated). 

In this proposed rule, we are 

proposing under proposed new 

§ 412.522(b)(1)(i) to identify LTCH 

discharges with principal diagnoses 

relating to a psychiatric diagnosis or to 

rehabilitation based on the MS–LTC– 

DRG assignment in accordance with 

§ 412.513 of the regulations. In 

developing this proposal, we began by 

examining which ICD–9–CM diagnosis 

codes appropriately identify a principal 

diagnosis related to a psychiatric 

diagnosis or to rehabilitation. Next, we 

determined which MS–DRGs (and by 

extension, MS–LTC–DRGs) those ICD–9- 

based diagnosis codes grouped to using 

Version 32 of the ICD–9–CM MS–DRG 

Definitions Manual, which shows the 

valid principal diagnoses for each MDC 

and the MS–DRG assignment for each of 

those principal diagnoses. We believe 

that the resulting list of MS–LTC–DRGs 

Version 32 are indicative of an LTCH 

discharge with a principal diagnosis 

relating to a psychiatric diagnosis or to 

rehabilitation because the classification 

of a Medicare discharge into a MS–LTC– 

DRG is predominantly based on the 

patient’s principal diagnosis. 

As stated above and as discussed in 

greater detail in section II.G.1. of the 

preamble of this proposed rule, in 

preparation for the implementation of 

ICD–10, we have developed ICD–10- 

based MS–LTC–DRGs. Under the ICD– 

10 MS–DRGs Version 32 (and by 

extension the ICD–10 MS–LTC–DRGs 

Version 32), the same list of ICD–10 

MS–LTC–DRGs are indicative of an 

LTCH discharge with a principal 

diagnosis relating to a psychiatric 

diagnosis or to rehabilitation. As stated 

earlier in this section, for FY 2016, we 

are proposing to use the ICD–10 MS 

DRGs Version 33 under the IPPS and the 

ICD–10 MS–LTC–DRGs Version 33 

under the LTCH PPS. Therefore, for FY 

2016, we are proposing that an LTCH 

discharge assigned to one of the 

following proposed ICD–10 MS–LTC– 

DRGs Version 33 would identify a case 

with a principal diagnosis relating to a 

psychiatric diagnosis: 

• MS–LTC–DRG 876 (O.R. Procedure 

with Principal Diagnosis of Mental 

Illness); 

• MS–LTC–DRG 880 (Acute 

Adjustment Reaction & Psychosocial 

Dysfunction); 

• MS–LTC–DRG 881 (Depressive 

Neuroses); 

• MS–LTC–DRG 882 (Neuroses 

except Depressive); 

• MS–LTC–DRG 883 (Disorders of 

Personality & Impulse Control); 

• MS–LTC–DRG 884 (Organic 

Disturbances & Mental Retardation); 

• MS–LTC–DRG 885 (Psychoses); 

• MS–LTC–DRG 886 (Behavioral & 

Developmental Disorders); 

• MS–LTC–DRG 887 (Other Mental 

Disorder Diagnoses); 


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• MS–LTC–DRG 894 (Alcohol/Drug 

Abuse or Dependence, Left Ama); 

• MS–LTC–DRG 895 (Alcohol/Drug 

Abuse or Dependence, with 

Rehabilitation Therapy); 

• MS–LTC–DRG 896 (Alcohol/Drug 

Abuse or Dependence, without 

Rehabilitation Therapy with MCC); and 

• MS–LTC–DRG 897 (Alcohol/Drug 

Abuse or Dependence, without 

Rehabilitation Therapy without MCC). 

We also are proposing that, for FY 

2016, an LTCH discharge assigned to 

one of the following proposed ICD–10 

MS–LTC–DRGs Version 33 would 

identify an LTCH discharge with a 

principal diagnosis relating to 

rehabilitation: 

• MS–LTC–DRG 945 (Rehabilitation 

with CC/MCC); and 

• MS–LTC–DRG 946 (Rehabilitation 

without CC/MCC). 

Under these proposals, for FY 2016, 

an LTCH discharge grouped to any of 

the proposed MS–LTC–DRGs listed 

above would not meet the criteria under 

proposed new § 412.522(b)(1)(i) to be 

excluded from the site neutral payment 

rate. 

c. Proposed Addition of Definition of a 

‘‘Subsection (d) Hospital’’ to LTCH 

Regulations 

The site neutral payment rate 

established in section 1206(a) of Public 

Law 113–67 includes several references 

to ‘‘subsection (d) hospitals.’’ The term 

‘‘subsection (d) hospital’’ is defined in 

section 1886(d)(1)(B) of the Act and 

generally means a hospital located in 1 

of the 50 States or the District of 

Columbia other than a psychiatric 

hospital, a rehabilitation hospital, a 

children’s hospital, an LTCH, or a 

cancer hospital. Section 1886(m)(6)(D) 

of the Act, as added by section 

1206(a)(1) of Public Law 113–67, also 

specifies that any reference in that 

paragraph to a ‘‘subsection (d) hospital’’ 

is deemed to include a ‘‘subsection (d) 

Puerto Rico hospital.’’ Section 

1886(d)(9)(A) of the Act states that, as 

used in that section, the term 

‘‘subsection (d) Puerto Rico hospital’’ 

means a hospital that is located in 

Puerto Rico and that would be 

considered a subsection (d) hospital (as 

defined in paragraph (d)(1)(B)) if it were 

located in 1 of the 50 States. 

As part of our proposed 

implementation of section 1206(a) of 

Public Law 113–67, and under the broad 

authority under section 123(a)(1) of the 

BBRA, as amended by section 307(b) of 

the BIPA, we are proposing to add a 

definition of the term ‘‘subsection (d) 

hospital’’ under § 412.503 that would be 

applicable to the LTCH regulations 

under proposed new § 412.522. 

Specifically, we are proposing to define 

a ‘‘subsection (d) hospital’’ under 

§ 412.503, for purposes of proposed new 

§ 412.522, as a hospital defined in 

section 1886(d)(1)(B) of the Act, and 

includes any hospital that is located in 

Puerto Rico that would be defined as a 

subsection (d) hospital as defined in 

section 1886(d)(1)(B) of the Act if it 

were located in 1 of the 50 States. We 

believe that this proposed definition is 

consistent with definitions used in the 

statute, and would provide additional 

clarity in the proposed regulations 

presented in this proposed rule to 

implement the site neutral payment rate 

policies required by section 1206(a) of 

Public Law 113–67. 

d. Proposed Interpretation of 

‘‘Immediately Preceded’’ by a 

Subsection (d) Hospital Discharge 

Section 1886(m)(6)(A)(ii)(II) of the Act 

specifies that, in order to be excluded 

from payment under the site neutral 

payment rate, the LTCH discharge must 

meet the ICU criterion at section 

1866(m)(6)(A)(iii) of the Act or the 

ventilator criterion at section 

1866(m)(6)(A)(iv) of the Act, which are 

discussed in greater detail below. Both 

the ICU criterion and the ventilator 

criterion require that the LTCH 

admission be immediately preceded by 

a discharge from a subsection (d) 

hospital. 

For purposes of the ICU criterion and 

the ventilator criterion at sections 

1866(m)(6)(A)(iii) and (iv) of the Act, 

under the broad authority under section 

123(a)(1) of the BBRA, as amended by 

section 307(b) of the BIPA, we are 

proposing that the phrase ‘‘immediately 

preceded’’ by a discharge from a 

subsection (d) hospital means a 

Medicare patient is discharge from the 

subsection (d) hospital immediately 

prior to the patient’s admission to an 

LTCH. A Medicare patient discharge 

from the subsection (d) hospital to any 

other setting, including home, an IRF, 

an IPF, or a SNF would not be 

considered to be ‘‘immediately 

preceded’’ by a discharge from a 

subsection (d) hospital, nor fulfill the 

ICU criterion or the ventilator criterion 

in order to qualify for exclusion from 

the site neutral payment rate. We 

believe that this proposed policy, which 

would be codified at new proposed 

§ 412.522(b)(1)(ii), would appropriately 

identify an LTCH admission that was 

immediately preceded by a discharge 

from a subsection (d) hospital. Under 

this proposal, we are proposing to 

determine an applicable Medicare 

patient discharge from a subsection (d) 

hospital (as defined at proposed 

§ 412.503) by using the subsection (d) 

hospital’s discharge date on the 

Medicare claim and the LTCH 

admission date on the Medicare claim 

for the LTCH’s discharge. We also are 

proposing, for purposes of evaluation of 

the exclusion from the site neutral 

payment rate, that the discharge from a 

subsection (d) hospital must use Patient 

Discharge Status Code 63, which 

signifies a patient was discharged or 

transferred to an LTCH, or Patient 

Discharge Status Code 91, which 

signifies a patient was discharged/

transferred to a Medicare-certified LTCH 

with a planned acute care hospital 

inpatient readmission on hospital 

claims submitted for the LTCH’s 

discharge to be eligible for exclusion 

from the site neutral payment rate. We 

are proposing that a Medicare patient 

discharge that occurred on the same 

date as the LTCH admission (or, in 

certain rare circumstances, that 

occurred the date before the date of the 

LTCH admission) that has a patient 

discharge status code on the subsection 

(d) hospital claim that indicates 

discharge or transfer to an LTCH would 

fulfill the immediately preceded portion 

of the requirements to be excluded from 

the site neutral payment rate. Under this 

proposal, discharges from subsection (d) 

hospitals reporting a patient discharge 

status code other than 63 or 91 on the 

hospital’s claim could not serve as a 

basis for a discharge meeting the 

immediately preceded by a subsection 

(d) hospital discharge requirement for 

exclusion from the site neutral payment 

rate. We believe that it is appropriate to 

include discharges from a subsection (d) 

hospital that occur on the date before 

the date of the LTCH admission (that is, 

essentially within 1 calendar day of the 

LTCH admission) under our proposed 

interpretation of the term ‘‘immediately 

preceded’’ in order to account for those 

rare circumstances where a patient is 

discharged from a subsection (d) 

hospital before the midnight census, but 

was not admitted to the LTCH until after 

the midnight census of that date of 

discharge. As we expect that the vast 

majority of LTCH admissions would 

occur on the same date as the discharge 

from the subsection (d) hospital, and 

only in rare instances would the LTCH 

admission occur on the date after the 

discharge date from the subsection (d) 

hospital, increased frequency in LTCH 

admissions on the date after the IPPS 

discharge date would raise concerns 

that could merit further scrutiny. 

We note that this proposed 

interpretation of ‘‘immediately 

preceded’’ by a subsection (d) hospital 

would work in tandem with our existing 

interrupted stay policy at § 412.531. 


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Although we are not proposing to make 

any changes to our existing interrupted 

stay policy, we are making reference to 

it only to illustrate the consistency 

between our proposed policy and our 

existing program policies. The 

interrupted stay policy is a payment 

adjustment that was included under the 

LTCH PPS from the inception. In this 

discussion, we use the terms 

‘‘interrupted stay’’ and ‘‘interruption of 

stay’’ interchangeably. An interruption 

of stay occurs when, during the course 

of an LTCH hospitalization, the patient 

is discharged to an inpatient acute care 

hospital, an IRF, or a SNF for treatment 

or service that is not available at the 

LTCH for a specified period followed by 

readmittance to the same LTCH. As we 

stated when we established the 

interrupted stay policy (67 FR 50187), 

we believe that the readmission to the 

LTCH represents a continuation of the 

initial interrupted treatment, rather than 

a new admission. If an interruption of 

stay occurred, payment for both 

‘‘halves’’ of the LTCH discharge would 

be bundled, and Medicare would make 

a single payment based on the second 

date of discharge. The interruption of 

stay policy treats the second part of an 

interrupted stay as a ‘‘continuation’’ of 

the initial stay, not a separate LTCH 

admission. Based on this policy and the 

requirements of section 1206(a) of 

Public Law 113–67, in order for an 

LTCH discharge to be excluded from the 

site neutral payment rate and, therefore, 

receive payment based on the LTCH 

PPS standard Federal payment rate, the 

initial LTCH admission must be 

immediately preceded by a subsection 

(d) hospital discharge. Any interruption 

of stay defined under § 412.531 would 

not invalidate the immediately preceded 

status for the LTCH admission because 

we historically have treated interrupted 

stays as one stay. We believe that this 

interpretation of ‘‘immediately 

preceded’’ in the context of the existing 

interrupted stay policy is consistent 

with our historical treatment of LTCH 

cases involving interrupted stays. 

e. Proposed Implementation of the 

Intensive Care Unit (ICU) Criterion 

Section 1886(m)(6)(A)(iii)(I) of the Act 

specifies that in order to be excluded 

from payment under the site neutral 

payment rate under the ICU criterion, 

the LTCH admission must be 

immediately preceded by a discharge 

from a subsection (d) hospital that 

included at least 3 days in an intensive 

care unit (ICU), as determined by the 

Secretary. Furthermore, section 

1886(m)(6)(A)(iii)(II) of the Act states 

that, in determining ICU days, the 

Secretary shall use data from revenue 

center codes 020X or 021X (or such 

successor codes as the Secretary may 

establish). Revenue center codes are 

reported on the hospital claim (Form 

CMS–1450 that is also known as the 

UB–04), which is a uniform institutional 

provider bill suitable for use in billing 

multiple third party payers, that is 

developed and maintained by the 

National Uniform Billing Committee 

(NUBC). (We refer readers to Chapter 25, 

subsection 70.1 of the Medicare Claims 

Processing Manual (Pub. 100–4).) The 

revenue code description for revenue 

center code 020X is for intensive care, 

and the revenue code description for 

revenue center code 021X is for 

coronary care. Both revenue center 

codes are used to bill Medicare for 

services provided by ‘‘intensive care 

units (ICUs)’’ as defined under our 

existing definition at § 413.53(d) of the 

regulations. Both of these revenue code 

descriptions are further divided into 

subcategories that form a revenue center 

code series. For billing purposes, the 

‘‘X’’ in the revenue code descriptions for 

revenue center codes 020X and 021X 

refers to one of the subcategories 

available for that revenue center code 

series. (For additional information on 

the use of revenue center codes 020X 

and 021X, we refer readers to Chapter 

25, subsection 75.4 of the Medicare 

Claims Processing Manual (Pub. 100–4) 

and the NUBC’s Web site at: http:// 

www.nubc.org.) 

To implement the ICU criterion 

specified at section 1886(m)(6)(A)(iii) of 

the Act, we are proposing under 

proposed new § 412.522(b)(2) that the 

discharge from the subsection (d) 

hospital that immediately preceded (as 

previously discussed in section 

VII.B.3.d. of the preamble of this 

proposed rule) the admission to the 

LTCH includes at least 3 days in an ICU 

(as defined in § 413.53(d) of the 

regulations). Consistent with the broad 

authority under section 123(a)(1) of the 

BBRA, as amended by section 307(b) of 

the BIPA, we are proposing that at least 

3 days must be reported on the hospital 

claim submitted by the subsection (d) 

hospital using revenue center codes 

020X or 021X, the use of which must be 

consistent with our definition of an ICU 

under § 413.53(d) in order to fulfill the 

ICU criterion to be excluded from the 

site neutral payment rate. We believe 

that this proposal is consistent with the 

statute and appropriate because it 

would ensure that payment for 

discharges made under the LTCH PPS 

standard Federal payment rate are for 

services provided to critically ill 

beneficiaries who require long-term 

acute hospitalization. 

In developing our proposal for the 

implementation of the ICU criterion at 

section 1886(m)(6)(A)(iii) of the Act, we 

examined current hospital coding 

practices and the use of revenue center 

codes 020X and 021X, including the 

subcategory codes, as reported on the 

Medicare claims for IPPS hospitals. We 

do not expect a change in general 

hospital coding practices regarding 

revenue center code categories 020X 

and 021X as a result of this proposal. 

However, we will continue to monitor 

such coding practices and may propose 

to revise the ICU criterion regulations in 

the future if data from revenue center 

code series for revenue center codes 

020X and 021X indicate that any of the 

subcategories are not consistent with 

services provided by ICUs as defined 

under § 413.53(d). 

As previously noted with regard to 

our proposed implementation of the 

‘‘immediately preceded’’ requirement, 

our proposed implementation of the ICU 

criterion would also work in tandem 

with our existing interruption of stay 

policy. Again, we note that we are not 

proposing to make any changes to the 

existing interrupted stay policy, and we 

are referencing it only to illustrate the 

consistency between our proposed 

policy and our existing program 

policies. (For a description of our 

existing interrupted stay policy, we refer 

readers to the discussion in section 

VII.B.3.d. of the preamble of this 

proposed rule.) As previously noted, 

LTCH cases involving interrupted stays 

are treated as a single continuous LTCH 

stay. As such, under our proposal, the 

discharge from a subsection (d) hospital 

that immediately precedes the initial 

LTCH admission would determine 

whether the ICU criterion is met. Under 

our proposal, compliance with the ICU 

criterion would be based exclusively on 

the number of days the beneficiary 

spent in the immediately preceding 

subsection (d) hospital’s ICU prior to 

being initially admitted to the LTCH. If, 

during the intervening period of an 

interrupted LTCH stay, a beneficiary 

spends any number of days in the ICU 

of a subsection (d) hospital, those days 

would not be considered in the 

evaluation of the LTCH discharge for 

purposes of meeting the ICU criterion 

because such care would not have 

immediately preceded the initial 

admission to the LTCH. Conversely, if 

the subsection (d) hospital discharge 

that immediately preceded the initial 

LTCH admission meets the ICU criterion 

(that is, includes at least 3 ICU days), 

and the period of time relating to an 

intervening interrupted stay does not 

include any days in a subsection (d) 


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hospital’s ICU, the ICU criterion would 

still be met because the initial portion 

of the LTCH admission fulfilled the ICU 

criterion for exclusion from the site 

neutral payment rate. We believe that 

this proposed interpretation of the ICU 

criterion in the context of the existing 

interrupted stay policy is consistent 

with our historical treatment of LTCH 

cases involving interrupted stays. 

f. Proposed Implementation of the 

Ventilator Criterion 

Section 1886(m)(6)(A)(vi) of the Act 

specifies that in order to be excluded 

from payment under the site neutral 

payment rate under the ventilator 

criterion, the LTCH admission must be 

immediately preceded by a discharge 

from a subsection (d) hospital (as 

discussed in section VII.B.3.d. of the 

preamble of this proposed rule), and the 

LTCH discharge must be assigned to an 

MS–LTC–DRG based on the 

beneficiary’s receipt of at least 96 hours 

of ventilator services in the LTCH. As 

we discussed in section VII.B.3.b. of the 

preamble of this proposed rule, cases 

are assigned to MS–LTC–DRGs based, in 

part, on procedures performed during 

the beneficiary’s LTCH stay, which are 

reported on a Medicare claim using 

procedure codes. We are proposing that, 

for the purposes of a discharge being 

excluded from the site neutral payment 

rate, the discharge must use the 

applicable procedure code to indicate 

that at least 96 hours of ventilator 

services were received during the LTCH 

stay. Currently, under the ICD–9–CM 

coding system, procedure code 9672 

(Continuous invasive mechanical 

ventilation for 96 consecutive hours or 

more) is used to describe such long-term 

mechanical ventilator services provided 

during a hospital stay, including an 

LTCH stay. As discussed in sections 

II.G.1.a. and VII.C. of the preamble of 

this proposed rule, the use of the ICD– 

10–CM/PCS coding system will be 

required beginning October 1, 2015. 

Under the ICD–10–PCS coding system, 

procedure code 5A1955Z (Respiratory 

ventilation, greater than 96 consecutive 

hours) describes such long-term 

mechanical ventilator services provided 

during a hospital stay, including an 

LTCH stay. Therefore, we believe that it 

would be appropriate and consistent 

with the requirements at section 

1886(m)(6)(A)(vi)(II) of the Act to 

require LTCHs, effective with discharges 

in cost reporting periods beginning on 

or after October 1, 2015, to report 

procedure code 5A1955Z on hospital 

claims to indicate that the beneficiary 

received at least 96 hours of ventilator 

services during the LTCH stay as a 

condition of the LTCH discharge being 

eligible for exclusion from the site 

neutral payment rate based on the 

ventilator criterion. Under the broad 

authority under section 123(a)(1) of the 

BBRA, as amended by section 307(b) of 

the BIPA and in accordance with 

section 1206(a) of Public Law 111–67, 

under proposed new § 412.522(b)(3), we 

are proposing to require LTCHs to report 

ICD–10–PCS procedure code 5A1955Z 

on their claims to indicate that the 

beneficiary received at least 96 hours of 

ventilator services during the LTCH stay 

as a condition of that discharge being 

eligible for exclusion from the site 

neutral payment rate based on the 

ventilator criterion. 

Under this proposal, any LTCH 

discharges that do not report this 

procedure code on the claim submitted 

for payment would not meet the 

ventilator criterion. In developing this 

proposal, we recognized that many of 

the discharges reporting procedure code 

5A1955Z (that is, those cases involving 

at least 96 hours of mechanical 

ventilation services) are grouped into 

one of six MS–LTC–DRGs. However, 

discharges grouped into these six MS– 

LTC–DRGs are not necessarily limited to 

cases involving beneficiaries who have 

received at least 96 hours of mechanical 

ventilation services. In addition, there 

are some cases that do involve at least 

96 hours of mechanical ventilation that 

are correctly assigned to MS–LTC–DRGs 

other than the six MS–LTC–DRGs 

mentioned; for example, those cases 

grouped based on surgical hierarchy. 

Given the variance of possible MS– 

LTC–DRG assignments based on the 

procedure code indicating the receipt of 

at least 96 hours of mechanical 

ventilator services and the MS–LTC– 

DRG groupings, we believe that our 

proposal to determine eligibility for 

meeting the ventilator criterion under 

section 1886(m)(6)(A)(vi)(II) of the Act 

based on the procedure code used is 

more consistent with the language of the 

Act as added by Public Law 113–67. 

4. Proposed Determination of the Site 

Neutral Payment Rate (Proposed New 

§ 412.522(c)) 

a. General 

Section 1206(a) of Public Law 113–67 

amended section 1886(m) of the Act by 

adding paragraph (6), which specifies 

that beginning with cost reporting 

periods starting on or after October 1, 

2015, all LTCH PPS discharges are paid 

according to the site neutral payment 

rate unless certain criteria are met. In 

general, section 1886(m)(6)(B)(ii) of the 

Act specifies that the site neutral 

payment rate is the lower of the IPPS 

comparable per diem amount under 

§ 412.529(d)(4), including any 

applicable outlier payments under 

§ 412.525(a), or 100 percent of the 

estimated cost of the case. Consistent 

with the requirements of section 

1886(m)(6)(B)(ii) of the Act, we are 

proposing under proposed new 

§ 412.522(c)(1) that the site neutral 

payment rate is the lower of the IPPS 

comparable per diem amount 

determined under § 412.529(d)(4), 

including any applicable outlier 

payments under § 412.525(a), or 100 

percent of the estimated cost of the case 

determined under § 412.529(d)(2). 

Under our proposed calculation of the 

site neutral payment rate, proposed new 

§ 412.522(c)(1)(i) would provide that the 

IPPS comparable per diem amount 

would be calculated using the same 

method used to determine an amount 

comparable to the hospital IPPS per 

diem amount as set forth in the existing 

regulations at§ 412.529(d)(4), consistent 

with section 1886(m)(6)(B)(ii)(I) of the 

Act. Specifically, in the RY 2007 LTCH 

PPS final rule (71 FR 27852 through 

27853), we established a method to 

determine an amount payable under 42 

CFR part 412, subpart O, that is 

comparable to what would otherwise be 

paid under the IPPS for the costs of 

inpatient operating services, which is 

commonly referred to as the ‘‘the IPPS 

comparable per diem amount.’’ 

Accordingly, consistent with 

§ 412.529(d)(4), we are proposing to 

determine the IPPS comparable per 

diem amount based on the standardized 

amount determined under § 412.64(c), 

adjusted by the applicable DRG 

weighting factors determined under 

§ 412.60 as specified at § 412.64(g). We 

are proposing to further adjust this 

amount to account for differences in 

area wage levels based on geographic 

location using the applicable IPPS laborrelated share and the IPPS wage index 

for nonreclassified hospitals published 

in the annual IPPS final rule in 

accordance with § 412.525(c). For 

LTCHs located in Alaska and Hawaii, 

we are proposing that this amount 

would be further adjusted by the 

applicable COLA factors established 

annually during the rulemaking cycle. 

We also are proposing that the IPPS 

comparable per diem amount include an 

adjustment for treating a 

disproportionate share of low-income 

patients, consistent with the DSH 

payment adjustment under § 412.106, as 

applicable, which would include a 

proxy adjustment for the 

uncompensated care payment (78 FR 

50765 through 50767). In the case of an 

LTCH that is a teaching hospital, we are 

proposing that the IPPS comparable per 


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diem amount include an IME payment 

adjustment, consistent with the formula 

set forth under § 412.105, where the 

LTCH’s IME cap (that is, the limit on the 

number of full-time equivalent (FTE) 

residents that may be counted for IME) 

would be imputed from the LTCH’s 

direct GME cap as set forth at 

§ 413.79(c)(2). In addition, we are 

proposing that the IPPS comparable per 

diem amount also include payment for 

inpatient capital-related costs, based on 

the capital IPPS Federal rate determined 

in accordance with § 412.308(c), 

adjusted by the applicable IPPS DRG 

weighting factors. We are proposing to 

further adjust the capital IPPS Federal 

rate by the applicable geographic 

adjustment factors based on the 

geographic location of the LTCH and the 

COLA factors for LTCHs located Alaska 

and Hawaii, consistent with § 412.316. 

In addition, we are proposing to include 

in this amount the adjustments to the 

capital IPPS Federal rate for DSH 

payments in accordance with § 412.320 

and IME payments in accordance with 

§ 412.322. Consistent with 

§ 412.529(d)(4)(i)(B) and (C), we are 

proposing to determine the IPPS 

comparable per diem amount by 

dividing the IPPS comparable payment 

amount described above by the 

geometric average length of stay of the 

specific MS–DRG under the IPPS and 

multiplying that amount by the covered 

days of the LTCH stay. We are 

proposing that the IPPS comparable per 

diem amount be limited to the full 

comparable amount to what would 

otherwise be paid under the IPPS. 

The IPPS comparable per diem 

amount described under § 412.529(d)(4) 

does not include additional payments 

for extraordinarily high-cost cases under 

the IPPS outlier policy. Therefore, 

consistent with the requirements of 

section 1886(m)(6)(B)(ii)(I) of the Act, 

under our proposed calculation of the 

site neutral payment rate under 

proposed new § 412.522(c)(1), we are 

proposing to add any high-cost outlier 

(HCO) payment that may be payable 

under § 412.525(a) to the IPPS 

comparable per diem amount. To do so, 

as discussed in greater detail in section 

VII.B.7.b. of the preamble of this 

proposed rule, we also are proposing to 

revise the HCO policy under existing 

§ 412.525(a) to provide for high-cost 

outlier payments under the site neutral 

payment rate calculated under proposed 

new § 412.522(c). We are proposing that 

site neutral payment rate cases receive 

an additional payment for HCOs that 

would be equal to 80 percent of the 

difference between the estimated cost of 

the case and the HCO threshold, which 

we are proposing would be the sum of 

site neutral payment rate for the case 

and the IPPS fixed-loss amount. We also 

are proposing that HCO payments for 

site neutral payment rate cases would be 

budget neutral and are proposing to 

apply a budget neutrality factor to the 

LTCH PPS payments for those cases to 

maintain budget neutrality. (For 

additional information on our proposed 

revised HCO policy in regard to site 

neutral payment rate cases under 

§ 412.525(a), we refer readers to section 

VII.B.7.b. of the preamble of this 

proposed rule.) 

Furthermore, under our proposed 

calculation of the site neutral payment 

rate, under proposed new 

§ 412.522(c)(1)(ii), we are proposing to 

calculate 100 percent of the estimated 

cost of a case by multiplying the LTCH’s 

hospital-specific cost-to-charge ratio 

(CCR) by the Medicare allowable 

charges for the LTCH case, which is the 

same method we use to determine SSO 

payments under § 412.529(d)(2), as well 

as HCO payments under the HCO policy 

under § 412.525(a). Consistent with our 

existing policies for computing CCRs 

under the LTCH PPS, we also are 

proposing to apply the payment policies 

described under § 412.529(f)(4)(i) 

through (f)(4)(iii) to the calculation of 

the estimated cost of the case for site 

neutral payment rate cases under 

proposed new § 412.522(c)(1)(ii). Under 

this proposal, the CCR applied at the 

time a claim is processed would 

generally be based on either the most 

recent settled cost report or the most 

recent tentatively settled cost report, 

whichever is from the latest cost 

reporting period. CMS may specify an 

alternative to the CCR otherwise 

applicable if we believe that the CCR 

being applied is inaccurate, in 

accordance with section 150.24 of 

Chapter 3 of the Medicare Claims 

Processing Manual (Pub. 100–4), or an 

LTCH may request an alternate (higher 

or lower) CCR based on its presentation 

of substantial evidence in support of 

that alternate. The CMS Regional Office 

must approve the request, and the MAC 

notifies the LTCH whenever a change is 

made to its CCR. The applicable MAC 

may also use the statewide average CCR 

that is established annually by CMS if 

it is unable to determine an accurate 

CCR for an LTCH under one of the 

circumstances specified at existing 

§ 412.529(f)(4)(iii) (that is, in general, for 

a new LTCH, when the LTCH’s CCR 

exceeds 3 standard deviations from the 

corresponding national geometric mean 

CCR, and for a LTCH for which data to 

calculate a CCR are otherwise not 

available). These same CCR policies also 

are applicable under the LTCH PPS 

HCO policy (§ 412.525(a)(4)(iv)(B) and 

(a)(4)(iv)(C)). 

Currently, under the LTCH PPS, 

payments for HCO and SSO cases may 

be subject to reconciliation at cost report 

settlement under § 412.525(a)(4)(iv)(D) 

and § 412.529(f)(4)(iv), respectively. 

Under these policies, reconciliation is 

based on the CCR calculated using the 

CCR computed from the settled cost 

report that coincides with the discharge. 

Under our existing criteria, 

reconciliation occurs in instances where 

a LTCH’s actual CCR for the cost 

reporting period fluctuates plus or 

minus 10 percentage points compared to 

the interim CCR used to calculate 

payments when a claim is processed. 

We adopted this reconciliation policy 

for the LTCH PPS HCO and SSO cases 

because CCRs based on settled cost 

reports are not available when claims 

are processed unless significant delays 

are imposed on the payment of claims. 

(For additional information, we refer 

readers to the June 9, 2003 IPPS/LTCH 

PPS high-cost outlier final rule (68 FR 

34507) and sections 150.26 through 

150.28 of the Medicare Claims 

Processing Manual (Pub. 100–4).) Given 

the use of LTCH CCRs to calculate the 

estimated cost of cases under the 

proposed site neutral payment rate, we 

believe that it would be equally 

appropriate to apply the current CCR 

reconciliation policy principles to site 

neutral payment rate payments. 

Therefore, we are proposing under 

proposed new § 412.522(c)(4) to 

reconcile site neutral payment rate 

payments based on the CCR calculated 

using the settled cost report that 

coincides with the discharge. We also 

are proposing that, at the time of any 

such reconciliation of site neutral 

payment rate payments, such payments 

be adjusted to account for the time value 

of any underpayments or overpayments. 

Any adjustment would be based upon a 

widely available index to be established 

in advance by the Secretary and would 

be applied from the midpoint of the cost 

reporting period to the date of 

reconciliation. The index that would be 

used to calculate the time value of 

money is the monthly rate of return that 

the Medicare Trust Fund earns, which 

can be found at: http://www.ssa.gov/ 

OACT/ProgData/newIssueRates.html, 

consistent with our current 

reconciliation policy described in 

section 150.27 of Chapter 3 of the 

Medicare Claims Processing Manual 

(Pub. 100–4). Furthermore, we are 

proposing that our existing policies 

governing CCRs for both HCO (under 

§ 412.525(a)(4)(iv)(A) through (C)) and 


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SSO payments (under § 412.529(f)(4)(i) 

through (iii)) would apply to the CCRs 

used to determine the estimated cost of 

a case under proposed new 

§ 412.522(c)(4). 

b. Proposed Blended Payment Rate for 

FY 2016 and FY 2017 

Section 1886(m)(6)(B) of the Act 

establishes a transitional payment 

method for cases that will be paid the 

site neutral payment rate for LTCH 

discharges occurring in cost reporting 

periods beginning during FY 2016 or FY 

2017. For those discharges, the 

applicable site neutral payment rate is 

to be the blended payment rate specified 

in section 1886(m)(6)(B)(iii) of the Act. 

For LTCH discharges occurring in cost 

reporting periods beginning during FY 

2018 or later, the applicable site neutral 

payment rate will be the site neutral 

payment rate as defined in section 

1886(m)(6)(B)(ii) of the Act. 

Section 1886(m)(6)(B)(iii) of the Act 

specifies that the blended payment rate 

is comprised of 50 percent of the site 

neutral payment rate for the discharge 

under section 1886(m)(6)(B)(ii) of the 

Act and 50 percent of the LTCH PPS 

standard Federal payment rate that 

would have applied to the discharge if 

paragraph (6) of section 1886(m) of the 

Act had not been enacted. As previously 

discussed, we are proposing to codify 

the site neutral payment rate specified 

under section 1886(m)(6)(B)(ii) of the 

Act under proposed new § 412.522(c)(1), 

as adjusted under proposed new 

§ 412.522(c)(2). Under proposed new 

§ 412.522(c)(1), the site neutral payment 

rate is the lower of the IPPS comparable 

per diem amount determined under 

§ 412.529(d)(4), including any 

applicable outlier payments under 

§ 412.525(a), or 100 percent of the 

estimated cost of the case determined 

under § 412.529(d)(2). For purposes of 

the blended payment rate, we are 

proposing that the payment rate that 

would otherwise be applicable if section 

1886(m)(6) of the Act had not been 

enacted would be the LTCH PPS 

standard Federal payment; which, in 

light of other proposals presented in this 

proposed rule, would be the LTCH PPS 

Federal standard payment rate that is 

applicable to discharges that meet the 

criteria for exclusion from the site 

neutral payment rate under proposed 

new § 412.522(a)(2). That rate is the 

LTCH PPS standard Federal payment 

rate determined under § 412.523. 

Therefore, consistent with the 

requirements of section 

1886(m)(6)(B)(ii) of the Act, we are 

proposing under proposed new 

§ 412.522(c)(3), for LTCH discharges 

occurring in cost reporting periods 

beginning on or after October 1, 2015, 

and on or before September 30, 2017 

(that is, discharges occurring in cost 

reporting periods beginning during FYs 

2016 and 2017), the payment amount for 

site neutral payment rate cases would be 

a blended payment rate, which would 

be calculated as 50 percent of the 

applicable site neutral payment rate 

amount for the discharge as determined 

under proposed new § 412.522(c)(1) and 

50 percent of the applicable LTCH PPS 

standard Federal payment rate 

determined under § 412.523. Under this 

proposal, the payment amounts 

determined under proposed new 

§ 412.522(c)(1) (the site neutral payment 

rate) and under § 412.523 (the LTCH 

PPS standard Federal rate) would 

include any applicable adjustments, 

such as HCO payments, as applicable, 

consistent with the requirements under 

§ 412.523(d). For example, the portion 

of the blended payment for the 

discharge that is based on proposed new 

§ 412.522(c)(3) would include 50 

percent of any applicable site neutral 

HCO payment under our proposed 

revised HCO payment policy (discussed 

in detail in section VII.B.7.b. of the 

preamble of this proposed rule), 

consistent with proposed new 

§ 412.522(c)(1)(i), which provides for 

HCO payments under § 412.525(a). 

Similarly, the portion of the blended 

payment for the discharge that is based 

on the LTCH PPS standard Federal 

payment rate would include any 

applicable HCO payment under existing 

§ 412.525(a). 

c. Proposed LTCH PPS Standard Federal 

Payment Rate 

Section 1206(a) of Public Law 113–67 

amended section 1886(m) of the Act by 

adding paragraph (6), which specifies 

that beginning with cost reporting 

periods starting on or after October 1, 

2015, all LTCH PPS discharges are paid 

according to the site neutral payment 

rate, unless certain criteria are met. For 

detailed discussion of our proposals 

regarding the criteria for exclusion from 

the site neutral payment rate, we refer 

readers to section VII.B.3. of the 

preamble of this proposed rule. For 

LTCH cases that meet the criteria for 

exclusion from the site neutral payment 

rate, section 1886(m)(6)(A)(ii) of the Act 

specifies that the site neutral payment 

rate will not apply and payment will be 

made without regard to requirements of 

section 1886(m)(6)(A)(ii) of the Act. 

Consistent with these statutory 

requirements, we are proposing under 

proposed new § 412.522(a)(2) that for 

LTCH discharges that meet the criteria 

for exclusion from site neutral payment 

rate under proposed new § 412.522(b), 

payment will be based on the LTCH PPS 

standard Federal payment rate as 

determined in § 412.523. That is, under 

proposed new § 412.522(a)(2), LTCH 

PPS standard Federal payment rate 

cases would continue to be paid based 

on the LTCH PPS standard Federal 

payment rate. Under this proposal, all of 

the existing payment adjustments under 

§ 412.525(d), that is, the adjustments for 

SSO cases under § 412.529, the 

adjustments for interrupted stays under 

§ 412.531, and the 25-percent threshold 

policy under § 412.534 and § 412.536, 

would still apply if appropriate. In 

addition, as discussed in greater detail 

in section VII.B.7.b. of the preamble of 

this proposed rule, we are proposing 

that our existing HCO policy would 

apply to LTCH PPS standard Federal 

payment rate cases, except that the 8 

percent HCO target would be 

established using only data from LTCH 

PPS standard Federal payment rate 

cases. 

5. Proposed Application of Certain 

Existing LTCH PPS Payment 

Adjustments to Payments Made Under 

the Site Neutral Payment Rate 

Consistent with current LTCH PPS 

payment policies for adjusting Federal 

prospective payments, under the broad 

authority under section 123(a)(1) of the 

BBRA, as amended by section 307(b) of 

the BIPA, we are proposing that certain 

existing payment adjustments under the 

special payment provisions set forth at 

existing § 412.525(d), with the exception 

of the SSO adjustment described under 

§ 412.525(d)(1). These adjustments 

include the interrupted stay policy and 

25-percent threshold policy. The current 

payment adjustment under the 

interrupted stay policy at § 412.531 was 

developed and implemented prior to the 

statutory LTCH PPS dual-rate payment 

structure and contains terms specific to 

payment based on the LTCH PPS 

standard Federal payment rate (such as 

LTC–DRG payment and Federal LTC– 

DRG prospective payment). Under our 

proposal, the site neutral payment rate 

would not be calculated based on the 

LTCH PPS standard Federal payment 

rate because the payment would 

generally be the lower of the IPPS 

comparable per diem amount (including 

any applicable outlier payments), or 100 

percent of the estimated cost of the case. 

Consequently, in order to apply the 

provisions of the existing interrupted 

stay policy at § 412.531 to site neutral 

payment rate cases, under proposed 

new § 412.522(c)(2)(ii), we are 

proposing to specify that, for purposes 

of the application of the provisions of 

412.531 to LTCH discharges described 

under § 412.522(a)(1), the LTCH PPS 


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standard payment-related terms, such as 

‘‘LTC–DRG payment’’, ‘‘full Federal 

LTC–DRG prospective payment’’, and 

‘‘Federal prospective payment,’’ mean 

the site neutral payment rate calculated 

under proposed new § 412.522(c). 

We believe that it is appropriate to 

apply these adjustments to the site 

neutral payment rate cases because the 

site neutral payment rate merely 

establishes an alternate payment 

amount under the LTCH PPS, as 

opposed to creating an exception from 

the LTCH PPS. Additionally, we believe 

that the policy concerns upon which 

these policies were based apply equally 

to payments made under the LTCH PPS 

site neutral payment rates and the 

standard Federal payment rates. 

We established the interrupted stay 

policy to address instances in which a 

patient is discharged from an LTCH and 

later readmitted to that LTCH within a 

certain amount of time. This kind of 

readmission to the LTCH represents a 

continuation or resumption of the 

initial, interrupted treatment, rather 

than a new admission. (For a discussion 

of our implementation of the 

interrupted stay policy, we refer readers 

to the RY 2003 LTCH PPS final rule (67 

FR 56002).) We continue to believe that 

the interrupted stay policy serves as an 

effective instrument to protect the 

Medicare Trust Fund from significant 

and inappropriate expenditures (78 FR 

50768), and we do not believe that the 

site neutral payment rate will address 

these concerns unless the interrupted 

stay policy is applied to site neutral 

payment rate cases in the same manner 

as it is applied to standard Federal 

payment rate cases. 

The 25-percent threshold payment 

adjustment policy was implemented 

based on analyses of Medicare discharge 

data that indicated that patterns of 

patient shifting appeared to be occurring 

more for provider financial advantage 

than for patient benefit. In order to 

discourage such activity, a payment 

adjustment was applied to LTCH 

discharges of patients who were 

admitted to the LTCH from the same 

referring hospital in excess of an 

applicable percentage threshold (79 FR 

50185). We refer readers to the detailed 

discussions of the 25-percent threshold 

payment adjustment policy for LTCH 

hospital-within-hospitals (HwHs) and 

LTCH satellite facilities in the FY 2005 

IPPS/LTCH final rule (69 FR 49191 

through 49214) and its application to all 

other LTCHs in the RY 2008 LTCH PPS 

final rule (72 FR 26919 through 26944), 

as well as our discussion in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50185 

through 50187), for additional details on 

the 25-percent threshold payment 

adjustment. We do not believe that the 

site neutral payment rate will address 

these patient shifting concerns unless 

the 25-percent threshold payment 

adjustment is applied to site neutral 

payment rate cases in the same manner 

as it is applied to LTCH PPS standard 

Federal payment rate cases. 

In considering the potential policy 

proposals, we recognized that there is a 

current statutory moratorium on the full 

implementation of the 25-percent 

threshold payment adjustment policy 

under section 1206(b)(1)(A) of Public 

Law 113–67 that is scheduled to expire 

in FY 2016. (For a discussion of our 

implementation of the current statutory 

moratorium on the full implementation 

of the 25-percent threshold payment 

adjustment policy, we refer readers to 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50185 through 50187).) We are 

proposing to apply all of the payment 

adjustments to site neutral payment 

rates in the same manner as they are 

currently applied (and will continue to 

be applied for the foreseeable future) to 

LTCH PPS standard Federal payment 

rates—including, as applicable, the 

moratorium on implementing the 25- 

percent threshold payment adjustment. 

We are not proposing to apply the 

SSO payment adjustment to the site 

neutral payment rate at this time 

because, while the policy goal of 

ensuring patients in an LTCH receive a 

full course of treatment remains, under 

our current method of paying for SSOs 

as described under § 412.529, we pay for 

SSOs based on the lowest of several 

payment options, one of which is the 

LTCH’s estimated cost of the case. As 

described above, site neutral payment 

rate cases are paid the lower of the IPPS 

comparable per diem amount, or 100 

percent of the estimated cost of the case. 

Because the estimated cost option is 

used in determining both SSO payments 

and site neutral payment rates and both 

methods make payment based on the 

lowest of their respective payment 

options, in most cases, applying our 

current SSO payment adjustment to site 

neutral payment rate cases would not 

affect the resulting LTCH PPS payment 

made for the discharge. We may 

consider proposing the application of an 

alternative SSO payment adjustment in 

the future if we find evidence that 

Medicare beneficiaries are not regularly 

receiving the full course of treatment 

when such treatment is paid for at the 

site neutral payment rate. 

6. Proposals Relating to the LTCH 

Discharge Payment Percentage 

Section 1886(m)(6)(C) of the Act, as 

added by section 1206 of Public Law 

113–67, imposes several requirements 

related to an LTCH’s discharge payment 

percentage. As defined by section 

1886(m)(6)(C)(iv) of the Act, the term 

‘‘LTCH discharge payment percentage’’ 

is a ratio, expressed as a percentage, of 

Medicare discharges not paid the site 

neutral payment rate to total number of 

Medicare discharges occurring during 

the cost reporting period. In other 

words, an LTCH’s discharge payment 

percentage would be the ratio of an 

LTCH’s Medicare discharges that meet 

the criteria for exclusion from the site 

neutral payment rate (as described 

under proposed new § 412.522(a)(2)) to 

an LTCH’s total number of Medicare 

discharges paid under the LTCH PPS 

(that is, both Medicare discharges paid 

under the site neutral payment rate and 

those that meet the criteria for exclusion 

from the site neutral payment rate, as 

described under proposed new 

§ 412.522(a)(1) and (2), respectively) 

during the cost reporting period. 

Therefore, consistent with the statutory 

requirement at section 1886(m)(6)(C)(iv) 

of the Act and under the broad authority 

under section 123(a)(1) of the BBRA, as 

amended by section 307(b) of the BIPA, 

under proposed new § 412.522(d)(1), we 

are proposing to define an LTCH’s 

discharge payment percentage as a ratio, 

expressed as a percentage, of Medicare 

discharges excluded from the site 

neutral payment rate as described under 

proposed new § 412.522(a)(2) to total 

Medicare discharges paid under the 

LTCH PPS (in accordance with 42 CFR 

part 412, subpart O) during the cost 

reporting period. 

In addition, section 1886(m)(6)(C)(i) 

of the Act requires that we provide 

notice to each LTCH of the LTCH’s 

discharge payment percentage (as 

defined in section 1886(m)(6)(C)(iv) of 

the Act) for LTCH cost reporting periods 

beginning during or after FY 2016. 

Therefore, we are proposing to codify 

this statutory requirement at proposed 

new § 412.522(d)(2). Under this 

proposal, for cost reporting periods 

beginning on or after October 1, 2015, as 

required by the statute, we would 

inform each LTCH of their discharge 

payment percentage as defined under 

proposed new § 412.522(d)(1). We plan 

to develop such a notification process 

through subregulatory guidance. We 

also note that, under section 

1886(m)(6)(C)(ii) of the Act, for cost 

reporting periods beginning on or after 

October 1, 2020, the statute requires that 

any LTCH whose discharge payment 

percentage for the period is not at least 

50 percent will be informed of such a 

fact and all of the LTCH’s discharges in 

each successive cost reporting period 

will be paid the payment amount that 


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would apply under subsection (d) for 

the discharge if the hospital were a 

subsection (d) hospital, subject to the 

process for reinstatement provided for 

by section 1886(m)(6)(C)(iii) of the Act. 

Because this statutory requirement is 

not effective until cost reporting periods 

beginning on or after October 1, 2020, 

we are not making any proposals related 

to the limitation requirement or the 

process for reinstatement at this time. 

However, we are inviting public 

comments on the development and 

implementation of the process for 

reinstatement under section 

1886(m)(6)(C)(iii) of the Act. 

7. Additional LTCH PPS Policy 

Considerations Related to the 

Implementation of the Site Neutral 

Payment Rate Required by Section 

1206(a) of Public Law 113–67 

As discussed earlier in this section, 

section 1206(a) of Public Law 113–67 

amended section 1886(m) of the Act by 

adding paragraph (6), which establishes 

patient-level criteria for payments made 

under the LTCH PPS for LTCH 

discharges occurring during cost 

reporting periods beginning on or after 

October 1, 2015 (FY 2016). In the FY 

2015 IPPS/LTCH PPS proposed and 

final rules, we stated our intent to 

implement the requirements established 

by section 1206(a) of Public Law 113– 

67 through notice and comment 

rulemaking during the FY 2016 IPPS/ 

LTCH PPS rulemaking cycle. In the FY 

2015 IPPS/LTCH PPS proposed rule (79 

FR 28205 through 28206), we discussed 

several significant issues arising from 

the statutory changes to the LTCH PPS 

required by section 1206(a) of Public 

Law 113–67, which establishes two 

distinct payment groups for LTCH 

discharges under the revised system: 

Discharges meeting specified patientlevel criteria that will be paid under the 

LTCH PPS standard Federal payment 

rate and all other patient discharges that 

will be paid under the site neutral 

payment rate. In that same proposed 

rule, we expressed our interest in 

receiving feedback from LTCH 

stakeholders on our plans to evaluate 

whether it would be appropriate to 

modify any of our historical policies or 

methodologies as we began to develop 

proposals to implement the statutory 

changes to the LTCH PPS. In particular, 

we solicited public feedback on the 

policies relating to the MS–LTC–DRG 

relative payment weights and high-cost 

outlier payments in preparation of 

developing proposals to implement the 

statutory changes to the LTCH PPS 

beginning in FY 2016. We explained 

that in setting the payment rates and 

factors under the LTCH PPS in 

accordance with requirements of section 

1206(a) of Public Law 113–67, for 

certain LTCH PPS payment adjustments 

we planned to evaluate whether it 

would be appropriate to modify our 

historical methodology to account for 

the establishment of the two distinct 

payment rates for LTCH discharges. In 

particular, we stated our intent to 

examine whether, beginning in FY 2016, 

it would continue to be appropriate to 

include data for all LTCH PPS cases, 

including site neutral payment rate 

cases, in the methodology used to set 

the MS–LTC–DRGs relative payment 

weights. We also stated our intent to 

explore the possibility of changes to the 

current LTCH PPS high-cost outlier 

payment policy. Given the fact that, for 

a number of LTCH discharges, payment 

would be made based on the lower site 

neutral payment rate (that is, the lesser 

of an ‘‘IPPS comparable’’ payment 

amount or 100 percent of the estimated 

cost of the case), we believed that it 

would be appropriate to evaluate 

whether a single high-cost outlier 

threshold could be applied to all LTCH 

PPS cases (both LTCH PPS standard 

Federal payment rate and site neutral 

payment rate cases), or whether it may 

be more appropriate to have separate 

high-cost outlier thresholds for each of 

the two payment rates under the 

statutory revisions to the LTCH PPS. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50197 through 50198), we 

summarized the comments we received 

in response to our request for input from 

LTCH stakeholders. As we stated in that 

same final rule, we appreciated the 

commenters’ thoughtful and detailed 

feedback, particularly those comments 

regarding the MS–LTC–DRG relative 

payment weights and the high-cost 

outlier policy under the new LTCH PPS 

dual-rate payment structure established 

by section 1206(a) of Public Law 113– 

67. In developing the proposals 

presented in this proposed rule, we 

considered the recommendations and 

information provided by those 

commenters. Below we discuss our 

policy proposals related to the MS– 

LTC–DRG payment relative weights and 

high-cost outlier policy in regard to our 

proposed implementation policies 

under the LTCH PPS dual-rate payment 

structure required by section 1206(a) of 

Public Law 113–67. 

a. MS–LTC–DRG Relative Payment 

Weights 

Under the LTCH PPS, relative 

payment weights for each MS–LTC– 

DRG are a primary element used to 

account for the variations in cost per 

discharge and resource utilization 

between the diagnosis-related groups 

(§ 412.515). Each year, based on the 

latest available LTCH claims data, we 

calculate a relative payment weight for 

each MS–LTC–DRG that represents the 

resources used for an average inpatient 

LTCH case assigned to that MS–LTC– 

DRG to ensure that Medicare patients 

with conditions or illnesses classified 

under each MS–LTC–DRG have access 

to an appropriate level of services and 

to encourage efficiency (79 FR 50170). 

CMS adjusts the classifications and 

weighting factors annually to reflect 

changes in factors affecting the relative 

use of hospital resources, such as 

treatment patterns, technology, and the 

number of discharges (§ 412.517). 

Under the new statutory LTCH PPS 

structure, section 1206(a) of Public Law 

113–67 establishes two distinct payment 

rates for LTCH discharges: Discharges 

meeting specified patient-level criteria 

that will be excluded from the site 

neutral payment rate and all other 

patient discharges that will be paid 

under the site neutral payment rate. As 

discussed in greater detail in section 

VII.B.4.c. of the preamble of this 

proposed rule, under proposed new 

§ 412.522(a)(2), we are proposing to pay 

for LTCH discharges that meet the 

criteria for exclusion from site neutral 

payment rate using the LTCH PPS 

standard Federal payment rate 

described under § 412.523, as adjusted. 

In other words, LTCH discharges that 

meet the specified patient-level criteria 

would continue to be paid at what we 

refer to as the ‘‘LTCH PPS standard 

Federal payment rate.’’ In general, the 

LTCH PPS standard Federal payment 

rate is calculated by adjusting the LTCH 

PPS standard Federal payment rate by 

the applicable MS–LTC–DRG relative 

payment weight for that Medicare cases. 

Under proposed new § 412.522(c) (as 

discussed in greater detail in section 

VII.B.4.a. of the preamble of this 

proposed rule), consistent with section 

1886(m)(6)((B)(ii) of the Act, we are 

proposing that the site neutral payment 

rate is the lower of the IPPS comparable 

per diem amount (including any 

applicable outlier payments), or 100 

percent of the estimated cost of the case. 

Under this proposal, the IPPS 

comparable per diem amount would be 

determined using the same method to 

determine SSO payments under the SSO 

policy at § 412.529(d)(4), and the 

estimated cost of the case would be 

determined using the same method to 

determine estimated costs under the 

SSO policy at § 412.529(d)(2). We note 

that the proposed methodology for 

determining payments for site neutral 

payment rate cases does not use the 

LTCH PPS standard Federal payment 


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rate or the applicable MS–LTC–DRG 

relative payment weights. 

As discussed above, in preparation for 

this proposed rule, we considered LTCH 

stakeholder input and evaluated 

whether it would be appropriate to 

modify our historical MS–LTC–DRG 

relative payment weight methodology to 

account for the establishment of the two 

distinct payment rates for LTCH 

discharges under the statutory changes 

to the LTCH PPS. Specifically, we 

examined whether our historical 

methodology, which uses data from all 

LTCH PPS discharges, should be 

continued when we calculate the MS– 

LTC–DRG relative payment weights 

under the new LTCH PPS dual-rate 

payment structure, or whether it would 

be more appropriate to limit the data 

used to calculate relative payment 

weights to that obtained from discharges 

paid based on the LTCH PPS standard 

Federal payment rate. Our existing 

methodology for developing the MS– 

LTC–DRG relative payment weights 

includes established policies related to 

the data used to calculate the relative 

payment weights, the hospital-specific 

relative value methodology, the 

treatment of severity levels in the MS– 

LTC–DRGs, the low-volume and novolume MS–LTC–DRGs, adjustments for 

nonmonotonicity, and the calculation of 

the MS–LTC–DRG relative payment 

weights with a budget neutrality factor 

(79 FR 50171). Our most recent 

discussion of the existing methodology 

for calculating the MS–LTC–DRG 

relative payment weights can be found 

in the FY 2015 IPPS/LTCH final rule (79 

FR 50168 through 50176). Our proposed 

methodology for calculating the FY 

2016 MS–LTC–DRG relative payment 

weights (including a proposal to use 

only data from the LTCH PPS standard 

Federal payment rate cases) is discussed 

in section VII.C.3. of the preamble of 

this proposed rule. 

In response to our solicitation for 

stakeholder input included in the FY 

2015 IPPS/LTCH PPS proposed rule, we 

received numerous comments that 

addressed the calculation of the MS– 

LTC–DRG relative payment weights 

under the new statutory LTCH PPS 

structure. In its comment, MedPAC 

urged CMS to establish ‘‘. . . new 

relative payment weights for each MS– 

LTC–DRG based solely on the most 

recent available standardized data 

associated with discharges meeting the 

specified patient-level criteria’’ because 

those discharges under the new law 

would represent cases treating the most 

severely ill, incurring higher resource 

costs that warrant higher LTCH 

payments. MedPAC also stated that the 

change in methodology should not 

result in increased aggregate payments 

for the cases paid under the LTCH PPS 

standard Federal payment rate under 

the new statutory LTCH PPS structure. 

Most of the other commenters agreed 

with MedPAC’s recommendation that 

the MS–LTC–DRG relative payment 

weights under the new statutory 

structure should be calculated using 

only the data from cases that meet the 

statutory patient-level criteria for 

exclusion from the site neutral payment 

rate (that is, LTCH PPS standard Federal 

payment rate cases), without including 

data from cases paid the site neutral 

payment rate. A few commenters 

conducted their own analyses and 

found that both relative payment weight 

approaches (that is, using data from all 

LTCH PPS cases as compared to using 

only data from standard Federal 

payment rate cases) produce MS–LTC– 

DRG relative payment weights that are 

similar. In addition, some of the 

commenters urged CMS to focus on 

keeping payments for LTCH PPS 

standard Federal payment rate cases at 

the same level that would have been in 

the absence of the statutory changes, or 

otherwise consider employing a 

methodology that promotes stability and 

predictability in the MS–LTC–DRG 

relative payment weights. Therefore, the 

overwhelming majority of the 

preliminary stakeholder feedback we 

received did not support using data 

from all LTCH PPS cases to determine 

the MS–LTC–DRG relative payment 

weights for the LTCH PPS standard 

Federal payment rate cases. 

We appreciate the commenters’ 

detailed feedback and have taken into 

consideration their concerns and 

recommendations in our evaluation the 

issue of the MS–LTC–DRG relative 

payment weights under the new LTCH 

PPS structure required by section 

1206(a) of Public Law 113–67. As part 

of our evaluation, we examined the FY 

2013 LTCH claims data used to 

determine the FY 2015 MS–LTC–DRG 

relative weights and found that 

approximately 54 percent of LTCH cases 

would meet the criteria for exclusion 

from the site neutral payment rate (that 

is, those cases would be paid the LTCH 

PPS standard Federal payment rate) and 

approximately 46 percent of LTCH cases 

would be paid the site neutral payment 

rate. We then compared the MS–LTC– 

DRG relative payment weights 

computed using data from all LTCH PPS 

cases to the MS–LTC–DRG relative 

payment weights computed using only 

data from the LTCH PPS standard 

Federal payment rate cases. Specifically, 

using the FY 2013 LTCH claims data 

(the same LTCH claims data used in the 

FY 2015 IPPS/LTCH PPS final rule), we 

calculated FY 2015 MS–LTC–DRG 

relative payment weights using only 

data from the 54 percent of LTCH PPS 

cases that would be paid the LTCH PPS 

standard Federal payment rate, and 

compared them to the FY 2015 MS– 

LTC–DRG relative payment weights 

established in Table 11 of the FY 2015 

IPPS/LTCH PPS final rule, which were 

calculated using data from all LTCH 

cases (that is, both LTCH PPS standard 

Federal payment rate cases and site 

neutral payment rate cases). Similar to 

results found by industry stakeholders, 

we found that both approaches 

produced comparable MS–LTC–DRG 

payments for LTCH PPS standard 

Federal payment rate cases. For 

example, our analysis of the average 

MS–LTC–DRG relative payment weight 

(that is, the case-mix) of LTCH PPS 

cases that would be paid the LTCH PPS 

standard Federal payment rate showed 

that the average case-mix using relative 

payment weights determined from using 

only data from LTCH PPS standard 

Federal payment rate cases differed by 

only approximately 0.01 percentage 

point from the average case-mix of those 

same cases using relative weights 

determined from data from all LTCH 

PPS cases. 

However, as discussed in more detail 

in section VII.B.7.b. of the preamble of 

this proposed rule, where we present 

our proposals regarding outlier 

payments for site neutral payment rate 

cases, we believe that the costs and 

resource use for cases paid at the site 

neutral payment rate in the future may 

be lower on average than the costs and 

resource use for LTCH cases in our 

historical data that would have been 

paid at the site neutral payment rate if 

the statutory changes were in place 

when the discharges occurred. We 

believe that this is likely, even if the 

proportion of site neutral payment rate 

cases in future data remains similar to 

the historical data (that is, 46 percent). 

Therefore, even though the above 

analysis shows that including or 

excluding what would have been site 

neutral payment rate cases if the new 

statutory requirements were applied to 

the historical discharges would not have 

much impact on the relative payment 

weight calculation for FY 2016, over 

time we believe that the relative 

payment weights could become 

distorted if future site neutral payment 

rate cases involve less intensive 

resource use and lower costs, which we 

believe is a plausible response to the 

lower site neutral payment rates under 

the statutory LTCH PPS changes. This 

also could lead to less stability in the 


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MS–LTC–DRG relative payment weights 

because these cases become 

incorporated into data used to calculate 

the relative payment weights. 

Taking all of this information into 

account and given the comments we 

received on this issue in the FY 2015 

rulemaking cycle, we believe that 

computing the MS–LTC–DRG relative 

payment weights using only data from 

LTCH PPS cases that would have been 

(or, in the future, are) paid the LTCH 

PPS standard Federal payment rate (that 

is, cases that meet the criteria for 

exclusion from the site neutral payment 

rate) would result in the most 

appropriate payments under the new 

statutory structure. Therefore, in this 

proposed rule, we are proposing that, 

beginning with FY 2016, the annual 

recalibration of the MS–LTC–DRG 

relative payment weighting factors 

would be determined using only data 

from LTCH discharges that meet the 

criteria for exclusion from the site 

neutral payment rate (that is, LTCH PPS 

standard Federal payment rate cases). 

Under our proposal, the MS–LTC–DRG 

relative payment weights would not be 

used to determine the LTCH PPS 

payment for cases paid the site neutral 

payment rate, and (in general) site 

neutral payment rate cases would be 

paid an IPPS comparable per diem 

amount (or 100 percent of the estimated 

cost of the case, if lower), which in most 

instances would be lower than the 

LTCH PPS standard Federal payment 

rate. 

As discussed above, several 

commenters also stated that payments 

for LTCH PPS standard Federal payment 

rate cases should be held at the same 

payment level that they would have 

been in the absence of the statutory 

changes. That is, any proposed changes 

in methodology should not result in any 

change (increase or decrease) in 

aggregate payments for LTCH PPS 

standard Federal payment rate cases 

under the new statutory LTCH PPS 

structure. As discussed in section 

VII.C.3. of the preamble of this proposed 

rule, under the existing LTCH PPS 

regulations at § 412.517(b), we already 

have a budget neutrality requirement for 

the annual changes to the MS–LTC– 

DRG classifications and relative 

payment weights, which specifies that 

any such changes must be made in a 

budget neutral manner such that 

estimated aggregate LTCH PPS 

payments are not affected. We are 

proposing to continue to apply that 

provision because we believe that a 

budget neutrality requirement is 

appropriate for the MS–LTC–DRG 

relative payment weights that would be 

used to determine LTCH PPS payments 

for LTCH PPS standard Federal payment 

rate cases for the reasons discussed 

when the policy was originally adopted 

in the FY 2008 LTCH PPS final rule (72 

FR 26880 through 26884). Therefore, we 

are not proposing any changes to the 

budget neutrality requirement at 

§ 412.517(b). Furthermore, in light of 

our proposals regarding the MS–LTC– 

DRG relative payment weighting factors, 

we are proposing to add paragraph (c) 

to § 412.517 to specify that, beginning in 

FY 2016, the annual recalibration of the 

MS–LTC–DRG relative weighting factors 

are determined using data from LTCH 

discharges described under proposed 

new § 412.522(a)(2). As discussed 

above, we believe that computing the 

MS–LTC–DRG relative payment weights 

using only data from LTCH PPS 

standard Federal payment rate cases 

would result in the most appropriate 

payments under the new statutory 

structure required by section 1206(a) of 

Public Law 113–67, and would provide 

stability and predictability in MS LTC– 

DRG payments for LTCH PPS standard 

Federal payment rate cases compared to 

current LTCH PPS payments. 

b. High-Cost Outliers 

Under the LTCH PPS, the existing 

regulations at § 412.525(a) provide for 

an additional adjustment to LTCH PPS 

payments to account for outlier cases 

that have extraordinarily high costs 

relative to the costs of most discharges 

(referred to as high-cost outliers 

(HCOs).) Providing such adjustments for 

HCOs strongly improves the accuracy of 

the LTCH PPS in determining resource 

costs at the patient and hospital level. 

In addition, HCO payments reduce the 

financial losses that would otherwise be 

incurred by hospitals when treating 

patients who require more costly care 

and, therefore, reduce the incentives to 

underserve these patients. Currently, we 

set the HCO threshold before the 

beginning of the payment year so that 

total estimated HCO payments are 

projected to equal 8 percent of estimated 

total payments under the LTCH PPS. 

Under our current HCO policy, an LTCH 

would receive an additional payment if 

the estimated cost of a case exceeds the 

adjusted LTCH PPS payment plus a 

fixed-loss amount. In such cases, the 

additional HCO payment amount is 

equal to 80 percent of the difference 

between the estimated cost of the case 

and the HCO threshold, which is the 

sum of the adjusted Federal MS–LTC– 

DRG prospective payment amount for 

the case and the fixed-loss amount. The 

fixed-loss amount is the amount used to 

limit the loss that an LTCH would incur 

under the HCO policy for a case with 

unusually high costs. This results in 

Medicare and the LTCH sharing 

financial risk in the treatment of 

extraordinarily costly cases. Under the 

HCO policy, the fixed-loss amount is the 

maximum loss that an LTCH can incur 

for a case with unusually high costs 

before receiving an additional payment 

amount. The additional payment 

amount under the LTCH PPS HCO 

policy is determined using a marginal 

cost factor, which is a fixed percentage 

of costs above the HCO threshold. The 

marginal cost factor under the LTCH 

PPS HCO policy is 80 percent. 

Under the current HCO policy, we 

annually determine a fixed-loss amount, 

that is, the maximum loss that an LTCH 

can incur under the LTCH PPS for a 

case with unusually high costs before an 

adjustment is made to the payment for 

the case. We do so by using the best 

available data to estimate aggregate 

LTCH PPS payments with and without 

a HCO policy, and, based on those 

estimates, set the fixed-loss amount at 

an amount that results in estimated total 

HCO payments being equal to 8 percent 

of estimated total LTCH PPS payments. 

Additional information on the LTCH 

PPS HCO methodology can be found in 

the FY 2003 LTCH PPS final rule (67 FR 

56022 through 56027) and the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50398 

through 50400). 

As discussed in the previous section, 

under the new statutory LTCH PPS 

structure, section 1206(a) of Public Law 

113–67 establishes two distinct payment 

rates for LTCH discharges beginning in 

FY 2016. To implement this statutory 

change, under proposed new 

§ 412.522(a)(2), we are proposing to pay 

for LTCH discharges that meet the 

criteria for exclusion from site neutral 

payment rate based on the LTCH PPS 

standard Federal payment rate, which 

includes HCO payments. Under 

proposed new § 412.522(c), consistent 

with the statute, we are proposing that 

the site neutral payment rate is the 

lower of the IPPS comparable per diem 

amount as determined under existing 

§ 412.529(d)(4) (including any 

applicable adjustments, such as outlier 

payments), or 100 percent of the 

estimated cost of the case as determined 

under existing § 412.529(d)(2). Below 

we discuss our proposals for 

determining HCO payments under the 

new statutory LTCH PPS payment 

structure. 

In response to our solicitation for 

stakeholder input included in the FY 

2015 IPPS/LTCH PPS proposed rule, we 

received numerous comments that 

addressed the HCO policy under the 

new statutory LTCH PPS structure. In its 

comment, MedPAC recommended that 

both LTCH PPS standard Federal rate 


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cases and site neutral payment rate 

cases receive HCO payments, and that 

estimated total HCO payments under 

the LTCH PPS continue to be projected 

to be equal to 8 percent of estimated 

total LTCH PPS payments for all cases 

(that is, both the LTCH PPS standard 

Federal payment rate cases and the site 

neutral payment rate cases). In contrast, 

most of the other commenters 

recommended that separate HCO fixedloss amounts and separate HCO 

payment ‘‘targets’’ (that is, the projected 

percentage that estimated HCO 

payments are of estimated total 

payments) be determined for LTCH PPS 

standard Federal payment rate cases and 

site neutral payment rate cases. 

Specifically, these commenters 

recommended that we calculate a fixedloss amount under the current HCO 

policy for LTCH PPS standard Federal 

payment rate cases using only data (and 

estimated payments) from what would 

have been or are LTCH PPS standard 

Federal payment rate cases, without 

including data (and estimated 

payments) from cases that would have 

been or are paid the site neutral 

payment rate. In addition, some of the 

commenters recommended initially 

applying the existing HCO policy 

separately to both LTCH PPS standard 

Federal payment rate cases and site 

neutral payment rate cases; that is, 

determining separate HCO fixed-loss 

amounts so that estimated HCO 

payments would be equal to 8 percent 

of estimated total payments for each of 

the two LTCH PPS payment types (the 

LTCH PPS standard Federal payment 

rate cases and site neutral payment rate 

cases), respectively, and then adjusting 

the HCO targets as more data under the 

statutory revisions to the LTCH PPS 

become available. In other words, 

commenters suggested that it may be 

more appropriate to have different HCO 

targets for the two LTCH PPS payment 

types rather than two HCO targets of 8 

percent. When making 

recommendations regarding the HCO 

policy under the statutory LTCH PPS 

changes, several commenters urged 

CMS to focus on maintaining LTCH PPS 

payments for LTCH PPS standard 

Federal payment rate cases at the same 

payment level as they are currently 

under the LTCH PPS, including the 

level of HCO payments, and to mitigate 

any instability in the HCO fixed-loss 

amount for LTCH PPS standard Federal 

payment rate cases. 

Several commenters conducted 

independent analyses that looked at 

separate HCO fixed-loss amounts for 

LTCH PPS standard Federal payment 

rate cases and site neutral payment rate 

cases. Upon review of their analyses, 

these commenters specifically 

recommended that separate HCO fixedloss amounts be used for the two LTCH 

PPS payment types. A few of the 

commenters’ analyses included 

assumptions about LTCH behavioral 

response to statutory changes to the 

LTCH PPS (such as changes in patient 

volume and costs). A few commenters 

indicated that using historical data 

would not reflect the anticipated 

behavioral response as a result of the 

new statutory payment structure and, 

therefore, may lead to an overestimation 

of costs and HCO payments (particularly 

with regard to payments for site neutral 

payment rate cases), resulting in a fixedloss amount that is set too high relative 

to the HCO target. If this were to occur, 

these commenters expressed concern 

that LTCHs would be ‘‘underpaid’’ 

because HCO payments are budget 

neutral and actual HCO payments 

would fall below the HCO payments 

target. 

We appreciate the commenters’ 

detailed feedback and have taken their 

concerns and recommendations into 

consideration while framing our 

proposed HCO policy under the new 

statutory LTCH PPS structure. As we 

always have for the LTCH PPS, we 

designed our proposed HCO policy 

under the new statutory structure to 

achieve a balance of the following goals: 

To reduce financial risk, reduce 

incentives to underserve costly 

beneficiaries, and improve the overall 

fairness of the PPS (67 FR 56023). With 

these goals in mind, we evaluated 

whether it would be appropriate to 

modify our current HCO policy to 

account for the establishment of the new 

LTCH PPS dual-rate payment structure. 

This included examining whether our 

current HCO target, under which we set 

a single fixed-loss amount so that 

estimated total HCO payments are 

projected to equal 8 percent of estimated 

total LTCH PPS payments, should 

continue to be used upon 

implementation of the statutory LTCH 

PPS payment changes, or whether it 

would be more appropriate to have two 

separate HCO targets (one for LTCH PPS 

standard Federal payment rate cases and 

one for site neutral payment rate cases). 

In examining this issue, we 

considered how LTCH discharges based 

on historical claims data would have 

been classified under the new dual-rate 

LTCH PPS payment structure and the 

CMS’ Office of the Actuary (OACT) 

projections regarding how LTCHs would 

likely respond to our proposed 

implementation of policies resulting 

from the statutory payment changes. For 

FY 2016, our actuaries currently project 

that the proportion of cases that would 

qualify as LTCH PPS standard Federal 

payment rate cases versus site neutral 

payment rate cases under the new 

statutory provisions would remain 

consistent with what is reflected in the 

historical LTCH PPS claims data. (As 

previously noted, based on FY 2013 

LTCH claims data, we found that 

approximately 54 percent of LTCH cases 

would have been paid the LTCH PPS 

standard Federal payment rate and 

approximately 46 percent of LTCH cases 

would have been paid the site neutral 

payment rate if those rates had been in 

effect at that time.) While our actuaries 

do not project an immediate change in 

these proportions, they do project cost 

and resource changes to take into 

account the lower payment rates. Our 

actuaries also project that the costs and 

resource use for cases paid at the site 

neutral payment rate would likely be 

lower, on average, than the costs and 

resource use for cases paid at the LTCH 

PPS standard Federal payment rate and 

would likely mirror the costs and 

resource use for IPPS cases assigned to 

the same MS–DRG, regardless of 

whether the proportion of site neutral 

payment rate cases in the future remains 

similar to what is found based on the 

historical data. This actuarial 

assumption is based on our expectation 

that site neutral payment rate cases 

would generally be paid based on an 

IPPS comparable per diem amount 

under the statutory LTCH PPS payment 

changes, which, in the majority of cases, 

is much lower than the payment that 

would have been paid if these statutory 

changes were not enacted. These 

assumptions are consistent with 

statements from several commenters 

who noted that the type of site neutral 

payment rate cases may change in cost 

and severity over time in response to the 

new statutory payment structure 

because the payment for those cases 

would generally be lower than the 

current payment made under the LTCH 

PPS for these types of cases. 

In light of these projections and 

expectations, we believe that the use of 

a single fixed-loss amount and HCO 

target for all LTCH PPS cases would be 

problematic. Currently, the FY 2015 

LTCH PPS fixed-loss amount is $14,972, 

which was determined using FY 2013 

LTCH claims data (79 FR 50400). The 

FY 2015 IPPS fixed-loss amount is 

$25,799 (79 FR 50374). A single fixedloss amount and target under the LTCH 

PPS would allow LTCH cases paid at 

the site neutral payment rate to qualify 

for HCO payments much more easily 

than comparable IPPS cases assigned to 

the same MS–DRG. This would occur 


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because the HCO threshold (which is 

generally the sum of the adjusted 

Federal PPS payment for the case and 

the fixed-loss amount) under the IPPS 

would be higher than the HCO 

threshold under the LTCH PPS for a 

case assigned to the same MS–DRG 

(which would be expected to have a 

comparable adjusted Federal PPS 

payment, costs and resource use to a 

case paid as a LTCH PPS site neutral 

payment rate case). While we recognize 

that differing statutory requirements 

between the two payment systems result 

in comparable LTCH PPS site neutral 

payment rate cases and IPPS cases not 

being paid exactly the same amount, we 

do not believe that it would be 

appropriate for comparable LTCH PPS 

site neutral payment rate cases to 

receive dramatically different HCO 

payments from those cases that would 

be paid under the IPPS. Based on the FY 

2015 figures, an IPPS hospital would 

have to absorb approximately $11,000 

more in additional estimated costs than 

the LTCH treating a comparable case 

based on the difference between the 

IPPS fixed-loss amount of $25,799 and 

the LTCH PPS fixed-loss amount of 

$14,792 before it would begin to receive 

HCO payments. We believe that the 

most appropriate fixed-loss amount for 

site neutral payment rate cases under 

the LTCH PPS for a given fiscal year 

beginning with FY 2016 would be the 

IPPS fixed-loss amount for that fiscal 

year. Therefore, for FY 2016, we are 

proposing a fixed-loss amount for site 

neutral payment rate cases of $24,485, 

which is the same proposed FY 2016 

IPPS fixed-loss amount discussed in 

section II.A.4.g.(1) of the Addendum to 

this proposed rule. We believe that this 

proposed policy would reduce 

differences between HCO payments for 

similar cases under the IPPS and site 

neutral payment rate cases under the 

LTCH PPS and promote fairness 

between the two systems. We also are 

proposing to make a payment 

adjustment for HCOs paid under the site 

neutral payment rate at a rate equal to 

80 percent of the difference between the 

estimated cost of the case and the 

proposed IPPS HCO threshold, which is 

consistent with the current LTCH PPS 

HCO policy. The proposed IPPS HCO 

threshold for site neutral payment rate 

cases would be the sum of the LTCH 

PPS payment for such cases and the 

proposed IPPS fixed-loss amount of 

$24,485. In light of these proposals, we 

note that any site neutral payment rate 

case that is paid 100 percent of the 

estimated cost of the case because that 

amount is lower than the IPPS 

comparable per diem amount would 

never be eligible to receive a HCO 

payment because, by definition, the 

estimated costs of such cases would 

never exceed the IPPS comparable 

amount by any threshold. 

Having established the IPPS fixed-loss 

amount as an appropriate threshold to 

propose for HCOs paid under the site 

neutral payment rate, we next examined 

how to establish an appropriate fixedloss amount and HCO target for LTCH 

PPS standard Federal payment rate 

cases. With that said, we agree with the 

commenters who recommended that we 

establish a fixed-loss amount and target 

for LTCH PPS standard Federal payment 

rate cases using the current LTCH PPS 

HCO policy, but limiting the data used 

under that policy to what would have 

been LTCH PPS standard Federal 

payment rate cases if the statutory 

changes had been in effect at the time 

of those discharges. We agree with the 

commenters that believed that this 

policy would result in increased 

stability over time with respect to HCO 

payments for the LTCH PPS standard 

Federal payment rate cases. We also 

believe that this approach would meet 

the goals cited for our current HCO 

policy; that is, reducing financial risk, 

reducing incentives to underserve costly 

beneficiaries, and improving the overall 

fairness of the LTCH PPS (67 FR 56023). 

Therefore, we are not proposing any 

modifications to the HCO methodology 

as it applies to LTCH PPS standard 

Federal payment rate cases other than 

determining a fixed-loss amount using 

only data from LTCH PPS standard 

Federal payment rate cases. Specifically, 

under our proposal, LTCH PPS standard 

Federal payment rate cases as described 

under proposed new § 412.522(a)(2) 

would receive an additional payment 

for an HCO case that is equal to 80 

percent of the difference between the 

estimated cost of the case and the HCO 

threshold, which would be the sum of 

the LTCH PPS payment for the LTCH 

PPS standard Federal payment rate case 

and the fixed-loss amount for such 

cases. The fixed-loss amount for LTCH 

PPS standard Federal payment rate 

cases would continue to be determined 

so that estimated HCO payments would 

be projected to be equal to 8 percent of 

estimated total LTCH PPS payments for 

LTCH PPS standard Federal payment 

rate cases. 

In this proposed rule, to codify our 

proposed changes to the HCO policy to 

account for the new statutory dual-rate 

LTCH PPS payment structure, we are 

proposing to revise paragraphs (a)(1), 

(a)(2), and (a)(3), and add a new 

paragraph (a)(4) to existing § 412.525. In 

existing § 412.525 (a)(1), (a)(2), and 

(a)(3), we are proposing to make 

technical changes to the existing 

language to make it clear that the 

provisions in those paragraphs apply to 

LTCH discharges under both LTCH PPS 

payment rates (that is, site neutral 

payment rate cases as described at 

proposed new § 412.522(a)(1) and the 

standard Federal payment rate cases as 

described at proposed new 

§ 412.522(a)(2)). Under the proposed 

added paragraph (a)(4) to § 412.524, we 

also are proposing to specify what the 

terms ‘‘applicable LTCH PPS 

prospective payment’’ and ‘‘applicable 

fixed-loss amount’’ mean for purposes 

of this paragraph. Specifically, we are 

proposing that, for purposes of 

§ 412.525(a), ‘‘applicable LTCH PPS 

prospective payment’’ would mean 

either the site neutral payment rate 

under proposed new § 412.522(c) for 

LTCH discharges described under 

proposed new § 412.522(a)(1) or the 

standard Federal prospective payment 

rates under § 412.523 for LTCH 

discharges described under proposed 

new § 412.522(a)(2). Similarly, we are 

proposing that, for purposes of 

§ 412.525(a), ‘‘applicable fixed-loss 

amount’’ would mean either, for LTCH 

described under proposed new 

§ 412.522(a)(1), the fixed-loss amount 

established for such cases, or, for LTCH 

discharges described under proposed 

new § 412.522(a)(2), the fixed-loss 

amount established for such cases. In 

addition, we are proposing to add 

language to paragraph (a) of § 412.525 to 

clarify that the fixed-loss is the 

maximum loss that a LTCH can incur 

under the LTCH PPS for a case with 

unusually high costs ‘‘before receiving 

an additional payment,’’ and is not the 

maximum loss an LTCH can incur. We 

are proposing to make this clarification 

to highlight that the additional payment 

under the HCO policy is 80 percent (not 

100 percent) of the estimated costs 

above the outlier threshold (that is, the 

sum of the applicable LTCH PPS 

prospective payment and the applicable 

fixed-loss amount). 

The current LTCH PPS HCO policy 

has a budget neutrality requirement in 

which the LTCH PPS standard Federal 

payment rate is reduced by an 

adjustment factor to account or the 

estimated proportion of HCO payments 

to total estimated LTCH PPS payments, 

that is, 8 percent. (We refer readers to 

§ 412.523(d)(1) of the regulations.) This 

budget neutrality requirement is 

intended to ensure that the HCO policy 

would not result in any change in 

estimated aggregate LTCH PPS 

payments. Under our proposal to 

continue to apply the current HCO 

methodology as it relates to LTCH PPS 


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standard Federal payment rate cases 

(other than determining a fixed-loss 

amount using only data from LTCH PPS 

standard Federal payment rate cases), 

we also would continue to apply the 

current budget neutrality requirement 

(described above). In accordance with 

the current LTCH PPS HCO policy 

budget neutrality requirement, we 

believe that the HCO policy for site 

neutral payment rate cases should also 

be budget neutral, meaning that the 

proposed site neutral payment rate HCO 

payments should not result in any 

change in estimated aggregate LTCH 

PPS payments. In order to achieve this, 

under proposed new § 412.522(c)(2)(i), 

we are proposing to apply a budget 

neutrality factor to the payment for all 

site neutral payment rate cases 

described under proposed new 

§ 412.522(a)(1), which would also be 

established on an estimated basis. This 

approach is consistent with the HCO 

policy proposed for LTCH PPS standard 

Federal payment rate cases, which is 

budget neutral within the universe of 

LTCH PPS standard Federal payment 

rate cases. We are inviting public 

comments on this proposed approach 

and the alternative approach of applying 

a single budget neutrality factor to all 

LTCH PPS cases, irrespective of the site 

neutral payment rate. 

In order to estimate the magnitude a 

proposed budget neutrality adjustment 

under our proposed HCO payment 

budget neutrality requirement for site 

neutral payment rate cases, we again 

relied on the assumption by our 

actuaries that site neutral payment rate 

cases would have lengths of stay and 

costs comparable to IPPS cases assigned 

to the same MS–DRG. Under the IPPS, 

the fixed-loss amount is estimated based 

on a 5.1 percent target (79 FR 50378). In 

accordance with section 

1886(d)(5)(A)(iv) of the Act, estimated 

operating IPPS HCO payments for any 

year are projected to be at least 5 

percent, but no more than 6 percent of 

estimated total operating DRG 

payments, which does not include IME 

and DSH payments plus HCO payments. 

When setting the HCO threshold, we 

historically compute a 5.1 percent target 

by dividing the total operating IPPS 

HCO payments by the total operating 

IPPS DRG payments plus operating IPPS 

HCO payments (79 FR 50374). We 

believe that it would be reasonable to 

set the site neutral payment rate case 

HCO target at the IPPS HCO target 

because these cases are expected to have 

lengths of stay and costs comparable to 

IPPS cases assigned to the same MS– 

DRG. Furthermore, using the IPPS fixedloss threshold for the site neutral 

payment rate cases would be expected 

to result in HCO payments for site 

neutral payment rate cases that are 

similar in proportion as is seen in IPPS 

cases assigned to the same MS–DRG; 

that is, 5.1 percent. We recognize that, 

given the uncertainty surrounding the 

site neutral payment rate case 

population under the revised LTCH PPS 

and differences between the relative 

utilization of the MS–DRGs and MS– 

LTC–DRGs between the two systems, 

this prediction may not take effect. 

However, we must begin somewhere, 

and this proposed policy seems to be 

the best budget neutrality option at this 

time based on the information available 

to ensure LTCH PPS spending does not 

inappropriately increase under our 

proposal for site neutral payment rate 

HCO cases. As with all of our policies, 

we will continue to monitor HCOs 

payments under the LTCH PPS and, as 

necessary, propose modifications to this 

proposed method as needed based on 

what is observed during the 

implementation process. 

Therefore, under proposed new 

§ 412.522(c)(2)(i), we are proposing to 

adjust payments to site neutral payment 

rate cases (that is, LTCH PPS discharges 

described under proposed new 

§ 412.522(a)(1)) by a budget neutrality 

factor so that the estimated HCO 

payments payable to site neutral 

payment rate cases do not result any 

increase in aggregate LTCH PPS 

payments. As discussed in greater detail 

in section V.D.4. of the Addendum to 

this proposed rule, in estimating total 

LTCH PPS payments in Federal FY 

2016, we are proposing an adjustment to 

account for the varying effective dates of 

the statutory LTCH PPS payment 

changes required by section 1886(m)(6) 

of the Act, as amended by section 1206 

of Public Law 113–67, which are 

effective for discharges occurring in cost 

reporting periods beginning on or after 

October 1, 2015. 

In addition to the proposed changes to 

the existing HCO policy under 

§ 412.525(a) and the budget neutrality 

adjustment to account for site neutral 

payment rate HCO payments under 

proposed § 412.522(c)(2)(i), we are 

proposing to make conforming changes 

to existing § 412.523 under paragraph 

(d)(1) to specify that the HCO target of 

8 percent in that provision only applies 

to HCO payments under § 412.525(a) as 

they relate to LTCH PPS standard 

Federal payment rate cases; that is, HCO 

payments made for discharges described 

under proposed new § 412.522(a)(2) and 

not all HCO payments described under 

proposed new § 412.525(a). 

In summary, in this proposed rule, we 

are proposing to have separate HCO 

fixed-loss amounts and HCO targets 

(and corresponding budget neutrality 

adjustments) for site neutral payment 

rate cases and LTCH PPS standard 

Federal payment rate cases, 

respectively, under the new LTCH PPS 

dual-rate payment structure. For the 

reasons discussed above, we believe that 

separate and independent HCO fixedloss amounts for each of the two types 

of LTCH PPS cases would result in the 

most appropriate payments under the 

LTCH PPS and achieve the stated goals 

of our HCO policy. In accordance with 

our proposed HCO policy for LTCH PPS 

standard Federal payment rate cases and 

site neutral payment rate cases, we are 

proposing that, beginning with FY 2016, 

our current HCO policy would apply to 

LTCH PPS standard Federal payment 

rate cases, such that LTCH PPS standard 

Federal payment rate cases would 

receive an additional payment for an 

HCO case that is equal to 80 percent of 

the difference between the estimated 

cost of the case and the LTCH PPS 

standard Federal payment HCO 

threshold (which would be the sum of 

the LTCH PPS standard Federal 

payment rate for the case and the fixedloss amount for such cases). The fixedloss amount for LTCH PPS standard 

Federal payment rate cases would 

continue to be determined so that 

estimated HCO payments would be 

projected to equal 8 percent of estimated 

total LTCH PPS payments for LTCH PPS 

standard Federal payment rate cases. To 

maintain budget neutrality, the LTCH 

PPS standard Federal payment rate 

would continue to be adjusted by 8 

percent to account for the estimated 

HCO payments to LTCH PPS standard 

Federal payment rate cases. Similarly, 

we are proposing that site neutral 

payment rate cases would receive an 

additional payment for an HCO case 

that is equal to 80 percent of the 

difference between the estimated cost of 

the case and the site neutral payment 

rate HCO threshold, which would be the 

sum of site neutral payment rate for the 

case and the fixed-loss amount for such 

cases. For site neutral payment rate 

cases, we are proposing to use the fixedloss amount determined annually under 

the IPPS HCO policy, and we estimate 

that this would result in an estimated 

proportion of HCO payments to total 

LTCH PPS payments for site neutral 

payment rate cases of 5.1 percent. We 

are proposing that HCO payments to site 

neutral payment rate cases would be 

budget neutral, consistent with the 

current LTCH PPS HCO policy. To 

maintain budget neutrality, we are 

proposing to apply a budget neutrality 

factor to the LTCH PPS payments for 


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site neutral payment rate cases. To 

codify the proposals discussed in this 

section, we are proposing to make 

changes to the existing HCO policy 

under § 412.525(a) and conforming 

changes to existing § 412.523(d)(1), as 

well as a budget neutrality requirement 

for HCO payments to site neutral 

payment rate cases under proposed new 

§ 412.522(c)(2)(i). 

c. Limitation on Charges to Beneficiaries 

In accordance with existing 

regulations and for the consistency with 

other established hospital prospective 

payment systems polices, we are 

proposing to revise § 412.507 to 

establish allowable charges to Medicare 

beneficiaries whose discharge from the 

LTCH is paid under the site neutral 

payment rate (as described in section 

VII.B.4. of the preamble of this proposed 

rule). Section 1206(a)(1) of Public Law 

113–67 requires that, beginning with 

cost reporting periods occurring on or 

after October 1, 2015, all LTCH 

discharges be paid at the applicable site 

neutral payment rate unless certain 

criteria are met. In general, the site 

neutral rate payment would be based on 

the lesser of 100 percent of the 

estimated cost of the case or the IPPS 

comparable per diem amount (as 

discussed more detail in section 

VII.B.4.a. of the preamble of this 

proposed rule). We believe that, in 

general, the LTCH PPS payment an 

LTCH receives at the site neutral 

payment rate represents a full payment 

for purposes of determining allowable 

beneficiary charges for covered services. 

As such, using the broad authority 

conferred upon the Secretary under 

section 123(a)(1) of the BBRA, as 

amended by section 307(b) of the BIPA, 

we are proposing to revise § 412.507 to 

limit allowable charges to beneficiaries. 

Specifically, we are proposing that, if 

Medicare has paid the full site neutral 

payment rate for a discharge, an LTCH 

may only charge the beneficiary 

applicable deductibles and copay 

amounts until the high-cost outlier 

threshold is met. In addition, we are 

proposing to revise the terminology 

used under § 412.507 to differentiate 

between cases paid under the site 

neutral payment rate and those paid 

under the LTCH PPS standard Federal 

payment rate. We note that under this 

proposed revision, for a case paid under 

the site neutral payment rate, that 

payment applies to the LTCH’s costs for 

services furnished until the high-cost 

outlier threshold is met, and LTCHs 

may charge the beneficiary for 

noncovered services in the same manner 

as if the case were paid under the LTCH 

PPS standard Federal payment rate, as 

specified under existing § 412.507. We 

are not proposing additional changes to 

our current provisions limiting charges 

to beneficiaries for discharges paid as 

SSO cases because, as explained in 

section VII.B.5. of the preamble of this 

proposed rule, we are not proposing to 

adopt any SSO payment adjustment 

policies for discharges paid under the 

site neutral payment rate at this time. 

We believe that these proposals 

concerning the limitation on charges to 

beneficiaries are in accordance with 

existing regulations and consistent with 

other established hospital payment 

systems policies. 

C. Proposed Medicare Severity LongTerm Care Diagnosis-Related Group 

(MS–LTC–DRG) Classifications and 

Relative Weights for FY 2016 

1. Background 

Section 123 of the BBRA required that 

the Secretary implement a PPS for 

LTCHs to replace the cost-based 

payment system under TEFRA. Section 

307(b)(1) of the BIPA modified the 

requirements of section 123 of the BBRA 

by requiring that the Secretary examine 

the feasibility and the impact of basing 

payment under the LTCH PPS on the 

use of ‘‘existing (or refined) hospital 

DRGs that have been modified to 

account for different resource use of 

LTCH patients.’’ 

When the LTCH PPS was 

implemented for cost reporting periods 

beginning on or after October 1, 2002, 

we adopted the same DRG patient 

classification system utilized at that 

time under the IPPS. As a component of 

the LTCH PPS, we refer to this patient 

classification system as the ‘‘long-term 

care diagnosis-related groups (LTC– 

DRGs).’’ Although the patient 

classification system used under both 

the LTCH PPS and the IPPS are the 

same, the relative weights are different. 

The established relative weight 

methodology and data used under the 

LTCH PPS result in relative weights 

under the LTCH PPS that reflect ‘‘the 

differences in patient resource use . . .’’ 

of LTCH patients (section 123(a)(1) of 

the BBRA (Pub. L. 106–113)). 

As part of our efforts to better 

recognize severity of illness among 

patients, in the FY 2008 IPPS final rule 

with comment period (72 FR 47130), the 

MS–DRGs and the Medicare severity 

long-term care diagnosis-related groups 

(MS–LTC–DRGs) were adopted under 

the IPPS and the LTCH PPS, 

respectively, effective beginning 

October 1, 2007 (FY 2008). For a full 

description of the development, 

implementation, and rationale for the 

use of the MS–DRGs and MS–LTC– 

DRGs, we refer readers to the FY 2008 

IPPS final rule with comment period (72 

FR 47141 through 47175 and 47277 

through 47299). (We note that, in that 

same final rule, we revised the 

regulations at § 412.503 to specify that 

for LTCH discharges occurring on or 

after October 1, 2007, when applying 

the provisions of 42 CFR part 412, 

subpart O applicable to LTCHs for 

policy descriptions and payment 

calculations, all references to LTC– 

DRGs would be considered a reference 

to MS–LTC–DRGs. For the remainder of 

this section, we present the discussion 

in terms of the current MS–LTC–DRG 

patient classification system unless 

specifically referring to the previous 

LTC–DRG patient classification system 

that was in effect before October 1, 

2007.) 

The MS–DRGs adopted in FY 2008 

represent an increase in the number of 

DRGs by 207 (that is, from 538 to 745) 

(72 FR 47171). The MS–DRG 

classifications are updated annually. 

There are currently 753 MS–DRG 

groupings. For FY 2016, there would be 

758 MS–DRG groupings if we finalize 

all of the proposed changed discussed 

in section II.G. of the preamble of this 

proposed rule. Consistent with section 

123 of the BBRA, as amended by section 

307(b)(1) of the BIPA, and § 412.515 of 

the regulations, we use information 

derived from LTCH PPS patient records 

to classify LTCH discharges into distinct 

MS–LTC–DRGs based on clinical 

characteristics and estimated resource 

needs. We then assign an appropriate 

weight to the MS–LTC–DRGs to account 

for the difference in resource use by 

patients exhibiting the case complexity 

and multiple medical problems 

characteristic of LTCHs. Below we 

provide a general summary of our 

existing methodology for determining 

the proposed FY 2016 MS–LTC–DRG 

relative weights under the LTCH PPS. 

In this proposed rule, in general, for 

FY 2016, we are proposing to use the 

same methodology and steps to 

determine the MS–LTC–DRG relative 

weights (as discussed in greater detail in 

section VII.C.3. of the preamble of this 

proposed rule). However, under the 

dual-rate LTCH PPS payment structure 

required by statute, we are proposing 

that, beginning with FY 2016, the 

annual recalibration of the MS–LTC– 

DRG relative weights would be 

determined (1) using only data from 

available LTCH PPS claims that would 

have qualified for payment under the 

new LTCH PPS standard Federal 

payment rate if that rate were in effect 

when claims data from time periods 

before the new statutory dual-rate LTCH 

PPS payment structure applies were 


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used to calculate the relative weights, 

and (2) using only data from available 

LTCH PPS claims that qualify for 

payment under the new LTCH PPS 

standard Federal payment rate when 

claims data from time periods after the 

dual rate LTCH PPS payment structure 

applies are used to calculate the relative 

weights. For the remainder of this 

discussion, we use the phrase 

‘‘applicable LTCH cases’’ or ‘‘applicable 

LTCH data’’ when referring to the 

resulting claims data set used to 

calculate the relative weights (as 

described in greater detail in section 

VII.C.3.c. of the preamble of this 

proposed rule). In addition, we are 

proposing to continue to exclude the 

data from all-inclusive rate providers 

and LTCHs paid in accordance with 

demonstration projects, as well as any 

Medicare Advantage claims from the 

MS–LTC–DRG relative weight 

calculations for the reasons discussed in 

section VII.C.3.c. of the preamble of this 

proposed rule. 

Under our proposal, the MS–LTC– 

DRG relative weights would not be used 

to determine the LTCH PPS payment for 

cases paid at the site neutral payment 

rate and data from cases paid at the site 

neutral payment rate or that would have 

been paid at the site neutral payment if 

the dual rate LTCH PPS payment 

structure had been in effect would not 

be used to develop the relative weights. 

(For details on our proposed application 

of the site neutral payment rate, we refer 

readers to section VII.B. of the preamble 

of this proposed rule. For additional 

information on our proposal to use data 

from applicable LTCH cases to 

determine the MS–LTC–DRG relative 

weights under the statutory dual-rate 

LTCH PPS payment structure, we refer 

readers to section VII.B.7.a. of the 

preamble of this proposed rule.) 

Furthermore, for FY 2016, in using 

data from applicable LTCH cases to 

establish MS–LTC–DRG relative 

weights, we are proposing to continue to 

establish low-volume MS–LTC–DRGs 

(that is, MS–LTC–DRGs with less than 

25 cases) using our quintile 

methodology in determining the MS– 

LTC–DRG relative weights because 

LTCHs do not typically treat the full 

range of diagnoses as do acute care 

hospitals. Therefore, for purposes of 

determining the relative weights for the 

large number of low-volume MS–LTC– 

DRGs, we group all of the low-volume 

MS–LTC–DRGs into five quintiles based 

on average charges per discharge. Then, 

under our existing methodology, we 

account for adjustments made to LTCH 

PPS standard Federal payment rate 

payments for short-stay outlier (SSO) 

cases (that is, cases where the covered 

length of stay at the LTCH is less than 

or equal to five-sixths of the geometric 

average length of stay for the MS–LTC– 

DRG), and we make adjustments to 

account for nonmonotonically 

increasing weights, when necessary. 

The methodology is premised on more 

severe cases under the MS–LTC–DRG 

system requiring greater expenditure of 

medical care resources and higher 

average charges such that, in the 

severity levels within a base MS–LTC– 

DRG, the relative weights should 

increase monotonically with severity 

from the lowest to highest severity level. 

(We discuss each of these components 

of our MS–LTC–DRG relative weight 

methodology in greater detail in section 

VII.C.3.g. of the preamble of this 

proposed rule.) 

2. Patient Classifications Into MS–LTC– 

DRGs 

a. Background 

The MS–DRGs (used under the IPPS) 

and the MS–LTC–DRGs (used under the 

LTCH PPS) are based on the CMS DRG 

structure. As noted above in this 

section, we refer to the DRGs under the 

LTCH PPS as MS–LTC–DRGs although 

they are structurally identical to the 

MS–DRGs used under the IPPS. 

The MS–DRGs are organized into 25 

major diagnostic categories (MDCs), 

most of which are based on a particular 

organ system of the body; the remainder 

involve multiple organ systems (such as 

MDC 22, Burns). Within most MDCs, 

cases are then divided into surgical 

DRGs and medical DRGs. Surgical DRGs 

are assigned based on a surgical 

hierarchy that orders operating room 

(O.R.) procedures or groups of O.R. 

procedures by resource intensity. The 

GROUPER software program does not 

recognize all ICD–9–CM procedure 

codes as procedures affecting DRG 

assignment. That is, procedures that are 

not surgical (for example, EKGs), or 

minor surgical procedures (for example, 

a biopsy of skin and subcutaneous 

tissue (procedure code 86.11)) do not 

affect the MS–LTC–DRG assignment 

based on their presence on the claim. 

Generally, under the LTCH PPS, a 

Medicare payment is made at a 

predetermined specific rate for each 

discharge and that payment varies by 

the MS–LTC–DRG to which a 

beneficiary’s stay is assigned. Cases are 

classified into MS–LTC–DRGs for 

payment based on the following six data 

elements: 

• Principal diagnosis; 

• Additional or secondary diagnoses; 

• Surgical procedures; 

• Age; 

• Sex; and 

• Discharge status of the patient. 

Currently, for claims submitted on the 

5010 format, up to 25 diagnosis codes 

and 25 procedure codes are considered 

for an MS–DRG assignment. This 

includes one principal diagnosis and up 

to 24 secondary diagnoses for severity of 

illness determinations. (For additional 

information on the processing of up to 

25 diagnosis codes and 25 procedure 

codes on hospital inpatient claims, we 

refer readers to section II.G.11.c. of the 

preamble of the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50127).) 

Under HIPAA transactions and code 

sets regulations at 45 CFR parts 160 and 

162, covered entities must comply with 

the adopted transaction standards and 

operating rules specified in Subparts I 

through S of part 162. Among other 

requirements, by January 1, 2012, 

covered entities were required to use the 

ASC X12 Standards for Electronic Data 

Interchange Technical Report Type 3— 

Health Care Claim: Institutional (837), 

May 2006, ASC X12N/005010X223, and 

Type 1 Errata to Health Care Claim: 

Institutional (837) ASC X12 Standards 

for Electronic Data Interchange 

Technical Report Type 3, October 2007, 

ASC X12N/005010X233A1 for the 

health care claims or equivalent 

encounter information transaction (45 

CFR 162.1102). 

HIPAA requires covered entities to 

use the applicable medical data code set 

requirements when conducting HIPAA 

transactions (45 CFR 162.1000). 

Currently, upon the discharge of the 

patient, the LTCH must assign 

appropriate diagnosis and procedure 

codes from the most current version of 

the Internal Classification of Diseases, 

Ninth Revision, Clinical Modification 

(ICD–9–CM). For additional information 

on the ICD–9–CM coding system, we 

refer readers to the FY 2008 IPPS final 

rule with comment period (72 FR 47241 

through 47243 and 47277 through 

47281). We also refer readers to the 

detailed discussion on correct coding 

practices in the August 30, 2002 LTCH 

PPS final rule (67 FR 55981 through 

55983). Additional coding instructions 

and examples are published in the 

Coding Clinic for ICD–9–CM, a product 

of the American Hospital Association. 

(We refer readers to section II.G.13. of 

the preamble of this proposed rule for 

additional information on the annual 

revisions to the ICD–9–CM codes.) 

Currently, providers use the code sets 

under the ICD–9–CM coding system to 

report diagnoses and procedures for 

Medicare hospital inpatient services 

under the MS–DRG system. We have 

been discussing the conversion to the 

ICD–10 coding system for many years. 

Hospitals, including LTCHs, are 


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required to use the ICD–10 coding 

system effective October 1, 2015. 

Consequently, providers will begin 

using the code sets under the ICD–10 

coding system to report diagnoses (ICD– 

10–CM codes) and procedures (ICD–10– 

PCS codes) for Medicare hospital 

inpatient services under the MS–DRG 

system (and by extension the MS–LTC– 

DRG system) beginning October 1, 2015. 

For additional information on the 

implementation of the ICD–10 coding 

system, we refer readers to section 

II.G.1. of the preamble of this proposed 

rule. 

To create the MS–DRGs (and by 

extension, the MS–LTC–DRGs), base 

DRGs were subdivided according to the 

presence of specific secondary 

diagnoses designated as complications 

or comorbidities (CCs) into one, two, or 

three levels of severity, depending on 

the impact of the CCs on resources used 

for those cases. Specifically, there are 

sets of MS–DRGs that are split into 2 or 

3 subgroups based on the presence or 

absence of a CC or a major complication 

or comorbidity (MCC). We refer readers 

to section II.D. of the FY 2008 IPPS final 

rule with comment period for a detailed 

discussion about the creation of MS– 

DRGs based on severity of illness levels 

(72 FR 47141 through 47175). 

MACs enter the clinical and 

demographic information submitted by 

LTCHs into their claims processing 

systems and subject this information to 

a series of automated screening 

processes called the Medicare Code 

Editor (MCE). These screens are 

designed to identify cases that require 

further review before assignment into a 

MS–LTC–DRG can be made. During this 

process, certain cases are selected for 

further development (74 FR 43949). 

After screening through the MCE, 

each claim is classified into the 

appropriate MS–LTC–DRG by the 

Medicare LTCH GROUPER software on 

the basis of diagnosis and procedure 

codes and other demographic 

information (age, sex, and discharge 

status). The GROUPER software used 

under the LTCH PPS is the same 

GROUPER software program used under 

the IPPS. Following the MS–LTC–DRG 

assignment, the Medicare contractor 

determines the prospective payment 

amount by using the Medicare PRICER 

program, which accounts for hospitalspecific adjustments. Under the LTCH 

PPS, we provide an opportunity for 

LTCHs to review the MS–LTC–DRG 

assignments made by the Medicare 

contractor and to submit additional 

information within a specified 

timeframe as provided in § 412.513(c). 

The GROUPER software is used both 

to classify past cases to measure relative 

hospital resource consumption to 

establish the MS–LTC–DRG relative 

weights and to classify current cases for 

purposes of determining payment. The 

records for all Medicare hospital 

inpatient discharges are maintained in 

the MedPAR file. The data in this file 

are used to evaluate possible MS–DRG 

and MS–LTC–DRG classification 

changes and to recalibrate the MS–DRG 

and MS–LTC–DRG relative weights 

during our annual update under both 

the IPPS (§ 412.60(e)) and the LTCH PPS 

(§ 412.517), respectively. 

b. Proposed Changes to the MS–LTC– 

DRGs for FY 2016 

As specified by our regulations at 

§ 412.517(a), which require that the MS– 

LTC–DRG classifications and relative 

weights be updated annually, and 

consistent with our historical practice of 

using the same patient classification 

system under the LTCH PPS as is used 

under the IPPS, we are proposing to 

update the MS–LTC–DRG classifications 

effective October 1, 2015, through 

September 30, 2016 (FY 2016) 

consistent with the proposed changes to 

specific MS–DRG classifications 

presented in section II.G. of the 

preamble of this proposed rule. 

Therefore, the proposed MS–LTC–DRGs 

for FY 2016 presented in this proposed 

rule are the same as the proposed MS– 

DRGs that are being proposed for use 

under the IPPS for FY 2016. 

Specifically, as discussed in section 

II.G.1.b. of this preamble of this 

proposed rule, we are proposing to use 

the ICD–10 MS–DRGs Version 33 as the 

replacement logic for the ICD–9–CM 

based MS–DRGs Version 32 as part of 

the proposed MS–DRG updates (and by 

extension the MS–LTC–DRG) updates 

for FY 2016. The proposed GROUPER 

Version 33 is based on ICD–10–CM/PCS 

diagnoses and procedure codes, 

consistent with the requirement to use 

ICD–10 beginning October 1, 2015, as 

noted above and discussed in greater 

detail section II.G.1. of the preamble of 

this proposed rule. We are inviting 

public comments on how well the ICD– 

10 MS–DRGs Version 33 (and by 

extension the ICD–10 MS–LTC–DRGs 

Version 33) replicates the logic of the 

ICD–9 MS–DRGs Version 32 (and by 

extension ICD–9 MS–LTC–DRGs 

Version 32). (We note that, when 

referencing MS–LTC–DRGs Version 33 

in the remainder of this section, we are 

referring to the ICD–10-based MS–LTC– 

DRGs Version 33 unless otherwise 

stated. Similarly, when referencing MS– 

LTC–DRGs Version 32 for the remainder 

of this section, we are referring to the 

ICD–9-based MS–LTC–DRGs Version 32 

unless otherwise stated.) In addition, 

because the proposed MS–LTC–DRGs 

for FY 2016 are the same as the 

proposed MS–DRGs for FY 2016, the 

other proposed changes that affect MS– 

DRG (and by extension MS–LTC–DRG) 

assignments under proposed GROUPER 

Version 33, as discussed in section II.G. 

of the preamble of this proposed rule, 

including the proposed changes to the 

MCE software and the ICD–10 coding 

system, would also be applicable under 

the LTCH PPS for FY 2016. 

3. Development of the Proposed FY 

2016 MS–LTC–DRG Relative Weights 

a. General Overview of the Development 

of the MS–LTC–DRG Relative Weights 

One of the primary goals for the 

implementation of the LTCH PPS is to 

pay each LTCH an appropriate amount 

for the efficient delivery of medical care 

to Medicare patients. The system must 

be able to account adequately for each 

LTCH’s case-mix in order to ensure both 

fair distribution of Medicare payments 

and access to adequate care for those 

Medicare patients whose care is more 

costly (67 FR 55984). To accomplish 

these goals, we have annually adjusted 

the LTCH PPS standard Federal 

prospective payment system rate by the 

applicable relative weight in 

determining payment to LTCHs for each 

case. In order to make these annual 

adjustments under the new dual-rate 

LTCH PPS payment structure required 

by the statute, as previously discussed 

in section VII.B.7.a. of the preamble of 

this proposed rule, we are proposing, 

beginning with FY 2016, to recalibrate 

the MS–LTC–DRG relative weighting 

factors annually using data from 

applicable LTCH cases. Under this 

proposal, the resulting MS–LTC–DRG 

relative weights would continue to be 

used to adjust the LTCH PPS standard 

Federal rate when calculating the 

payment for standard payment rate 

cases. However, the MS–LTC–DRG 

relative weights would not be used to 

determine the LTCH PPS payment for 

cases paid under the site neutral 

payment rate. (For details on our 

proposed application of the site neutral 

payment rate, we refer readers to section 

VII.B. of the preamble of this proposed 

rule.) 

The basic methodology used to 

develop the MS–LTC–DRG relative 

weights is generally consistent with the 

general methodology established when 

the LTCH PPS was implemented in the 

August 30, 2002 LTCH PPS final rule 

(67 FR 55989 through 55991), with the 

exception of some modifications of our 

historical procedures for assigning 

relative weights in cases of zero volume 

and/or nonmonotonicity resulting from 


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the adoption of the MS–LTC–DRGs. (For 

details on the modifications to our 

historical procedures for assigning 

relative weights in cases of zero volume 

and/or nonmonotonicity, we refer 

readers to the FY 2008 IPPS final rule 

with comment period (72 FR 47289 

through 47295) and the FY 2009 IPPS 

final rule (73 FR 48542 through 48550).) 

Under the LTCH PPS, relative weights 

for each MS–LTC–DRG are a primary 

element used to account for the 

variations in cost per discharge and 

resource utilization among the payment 

groups (§ 412.515). To ensure that 

Medicare patients classified to each 

MS–LTC–DRG have access to an 

appropriate level of services and to 

encourage efficiency, we calculate a 

relative weight for each MS–LTC–DRG 

that represents the resources needed by 

an average inpatient LTCH case in that 

MS–LTC–DRG. For example, cases in a 

MS–LTC–DRG with a relative weight of 

2 will, on average, cost twice as much 

to treat as cases in a MS–LTC–DRG with 

a relative weight of 1. 

b. Development of the Proposed MS– 

LTC–DRG Relative Weights for FY 2016 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50170 through 50176), we 

presented our policies for the 

development of the MS–LTC–DRG 

relative weights for FY 2015. The basic 

methodology we used to develop the FY 

2015 MS–LTC–DRG relative weights 

was the same as the methodology we 

used to develop the FY 2014 MS–LTC– 

DRG relative weights in the FY 2014 

IPPS/LTCH PPS final rule and was 

consistent with the general methodology 

established when the LTCH PPS was 

implemented in the August 30, 2002 

LTCH PPS final rule (67 FR 55989 

through 55991). 

In this proposed rule, we are 

proposing to continue to use the same 

general methodology to determine the 

proposed MS–LTC–DRG relative 

weights for FY 2016, including the 

proposed application of established 

policies related to, the hospital-specific 

relative value methodology, the 

treatment of severity levels in the 

proposed MS–LTC–DRGs, proposed 

low-volume and no-volume MS–LTC– 

DRGs, proposed adjustments for 

nonmonotonicity, and the steps for 

calculating the proposed MS–LTC–DRG 

relative weights with a proposed budget 

neutrality factor. However, as 

previously noted and discussed in 

greater detail in section VII.B.7.a. of the 

preamble of this proposed rule, under 

the dual-rate LTCH PPS payment 

structure required by statute, we are 

proposing that the FY 2016 MS–LTC 

DRG relative weights would be 

determined based only on data from 

applicable LTCH cases. We discuss the 

effects of our proposal concerning the 

data used to determine the FY 2016 

MS–LTC–DRG relative weights on the 

various components of our existing 

methodology in the discussion that 

follows. 

Furthermore, as we have done since 

the FY 2008 update, we are proposing 

to apply a two-step budget neutrality 

adjustment to the annual update to the 

MS–LTC–DRG classifications and 

relative weights at § 412.517(b) (in 

conjunction with § 412.503), such that 

estimated aggregate LTCH PPS 

payments would be unaffected, that is, 

would be neither greater than nor less 

than the estimated aggregate LTCH PPS 

payments that would have been made 

without the classification and relative 

weight changes (72 FR 26882 through 

26884). For additional information on 

the established two-step budget 

neutrality methodology, we refer readers 

to the FY 2008 IPPS final rule (72 FR 

47295 through 47296). Below we 

present our proposed methodology for 

determining the proposed MS–LTC– 

DRG relative weights for FY 2016 LTCH 

PPS standard Federal payment rate 

payments, which is generally consistent 

with the methodology presented in the 

FY 2015 IPPS/LTCH PPS final rule, 

except for the proposed use of 

applicable LTCH data. 

c. Applicable LTCH Data 

For this FY 2016 proposed rule, to 

calculate the proposed MS–LTC–DRG 

relative weights for FY 2016 LTCH PPS 

standard Federal payment rate 

payments, we obtained total charges 

from FY 2014 Medicare LTCH claims 

data from the December 2014 update of 

the FY 2014 MedPAR file, which are the 

best available data at this time, and the 

proposed Version 33 of the GROUPER to 

classify LTCH cases. Consistent with 

our historical practice, we are proposing 

that if more recent data become 

available, we would use those data and 

the finalized Version 33 of the 

GROUPER in establishing the FY 2016 

MS–LTC–DRG relative weights in the 

final rule. To calculate the proposed FY 

2016 MS–LTC–DRG relative weights 

under the new statutory dual-rate LTCH 

PPS payment structure that will be 

effective beginning October 1, 2015, as 

previously discussed in section 

VII.B.7.a. of the preamble of this 

proposed rule, beginning with the 

annual recalibration of the MS–LTC– 

DRG relative weights for FY 2016, we 

are proposing to use applicable LTCH 

data. Accordingly, we began by first 

evaluating the LTCH claims data in the 

December 2014 update of the FY 2014 

MedPAR file to determine which LTCH 

cases would have met the criteria for 

exclusion from the site neutral payment 

rate under proposed § 412.522(b) (as 

discussed in greater detail in section 

VII.B.3. of the preamble of this proposed 

rule) had the new dual-rate LTCH PPS 

payment structure been in effect at the 

time those claims were processed. We 

identified the FY 2014 LTCH cases that 

were not assigned to MS–LTC–DRGs 

876, 880, 881, 882, 883, 884, 885, 886, 

887, 894, 895, 896, 897, 945 and 946, 

which, under our proposals, would 

identify LTCH cases that do not have a 

principal diagnosis relating to a 

psychiatric diagnosis or to rehabilitation 

(as discussed in section VII.B.3.b. of the 

preamble of this proposed rule); and 

that either— 

• The admission to the LTCH was 

‘‘immediately preceded’’ by discharge 

from a subsection (d) hospital and the 

immediately preceding stay in that 

subsection (d) hospital included at least 

3 days in an ICU, as we define under the 

proposed ICU criterion (discussed in 

section VII.B.3.e. of the preamble of this 

proposed rule); or 

• The admission to the LTCH was 

‘‘immediately preceded’’ by discharge 

from a subsection (d) hospital and the 

claim for the LTCH discharge includes 

the applicable procedure code that 

indicates at least 96 hours of ventilator 

services were provided during the LTCH 

stay, as we define under the proposed 

ventilator criterion (discussed in section 

VII.B.3.f. of the preamble of this 

proposed rule). Claims data from 

December 2014 update of the FY 2014 

MedPAR file that reported ICD–9–CM 

procedure code 96.72 were used to 

identify cases involving at least 96 

hours of ventilator services in 

accordance with the proposed ventilator 

criterion. (We note that the 

corresponding ICD–10–PCS code for 

cases involving at least 94 hours of 

ventilation services is 5A1955Z, 

effective as of October 1, 2015.) 

Then, consistent with our historical 

methodology, we excluded any claims 

in the resulting data set that were 

submitted by LTCHs that are allinclusive rate providers and LTCHs that 

are reimbursed in accordance with 

demonstration projects authorized 

under section 402(a) of Public Law 90– 

248 or section 222(a) of Public Law 92– 

603. In addition, consistent with our 

historical practice, we excluded the 

Medicare Advantage (Part C) claims that 

were in the resulting data set based on 

the presence of a GHO Paid indicator 

value of ‘‘1’’ in the MedPAR files. The 

claims that remained after these three 

trims (that is, the applicable LTCH data) 

were then used to calculate the 


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proposed relative weights for the LTCH 

PPS standard Federal payment rate 

payments for FY 2016. 

In summary, in identifying the claims 

data for the development of the 

proposed FY 2016 MS–LTC–DRG 

relative weights in this proposed rule, 

we are proposing to use claims data 

after we trim the claims data of 10 allinclusive rate providers and the 1 LTCH 

that is paid in accordance with a 

demonstration project reported in the 

December 2014 update of the FY 2014 

MedPAR file, as well as any Medicare 

Advantage claims data for cases that 

would have met the criteria for 

exclusion from the site neutral payment 

rate under proposed § 412.522(b) if the 

new dual-rate LTCH PPS payment 

structure were in effect at the time those 

claims were processed. We are 

proposing to use the remaining data 

(that is, the applicable LTCH data) to 

calculate the proposed relative weights 

for the LTCH PPS standard Federal 

payment rate payments for FY 2016. 

d. Hospital-Specific Relative Value 

(HSRV) Methodology 

By nature, LTCHs often specialize in 

certain areas, such as ventilatordependent patients. Some case types 

(MS–LTC–DRGs) may be treated, to a 

large extent, in hospitals that have, from 

a perspective of charges, relatively high 

(or low) charges. This nonrandom 

distribution of cases with relatively high 

(or low) charges in specific MS–LTC– 

DRGs has the potential to 

inappropriately distort the measure of 

average charges. To account for the fact 

that cases may not be randomly 

distributed across LTCHs, consistent 

with the methodology we have used 

since the implementation of the LTCH 

PPS, we are proposing to continue to 

use a hospital-specific relative value 

(HSRV) methodology to calculate the 

proposed MS–LTC–DRG relative 

weights for FY 2016 LTCH PPS standard 

Federal payment rate payments. We 

believe this method removes this 

hospital-specific source of bias in 

measuring LTCH average charges (67 FR 

55985). Specifically, under this 

methodology, we are proposing to 

reduce the impact of the variation in 

charges across providers on any 

particular MS–LTC–DRG relative weight 

by converting each LTCH’s charge for an 

applicable LTCH case to a relative value 

based on that LTCH’s average charge for 

such cases. 

Under the HSRV methodology, we 

standardize charges for each LTCH by 

converting its charges for each 

applicable LTCH case to hospitalspecific relative charge values and then 

adjusting those values for the LTCH’s 

case-mix. The adjustment for case-mix 

is needed to rescale the hospital-specific 

relative charge values (which, by 

definition, average 1.0 for each LTCH). 

The average relative weight for a LTCH 

is its case-mix; therefore, it is reasonable 

to scale each LTCH’s average relative 

charge value by its case-mix. In this 

way, each LTCH’s relative charge value 

is adjusted by its case-mix to an average 

that reflects the complexity of the 

applicable LTCH cases it treats relative 

to the complexity of the applicable 

LTCH cases treated by all other LTCHs 

(the average LTCH PPS case-mix of all 

applicable LTCH cases across all 

LTCHs). 

In accordance with our established 

methodology, we standardize charges 

for each applicable LTCH case by first 

dividing the adjusted charge for the case 

(adjusted for SSOs under § 412.529 as 

described in section VII.C.3.g. (Step 3) 

of the preamble of this proposed rule) 

by the average adjusted charge for all 

applicable LTCH cases at the LTCH in 

which the case was treated. SSO cases 

are cases with a length of stay that is 

less than or equal to five-sixths the 

average length of stay of the MS–LTC– 

DRG (§ 412.529 and § 412.503). The 

average adjusted charge reflects the 

average intensity of the health care 

services delivered by a particular LTCH 

and the average cost level of that LTCH. 

The resulting ratio is multiplied by that 

LTCH’s case-mix index to determine the 

standardized charge for the case (67 FR 

55989). 

Multiplying the resulting ratio by the 

LTCH’s case-mix index accounts for the 

fact that the same relative charges are 

given greater weight at a LTCH with 

higher average costs than they would at 

a LTCH with low average costs, which 

is needed to adjust each LTCH’s relative 

charge value to reflect its case-mix 

relative to the average case-mix for all 

LTCHs. Because we standardize charges 

in this manner, we count charges for a 

Medicare patient at a LTCH with high 

average charges as less resource 

intensive than they would be at a LTCH 

with low average charges. For example, 

a $10,000 charge for a case at a LTCH 

with an average adjusted charge of 

$17,500 reflects a higher level of relative 

resource use than a $10,000 charge for 

a case at a LTCH with the same casemix, but an average adjusted charge of 

$35,000. We believe that the adjusted 

charge of an individual case more 

accurately reflects actual resource use 

for an individual LTCH because the 

variation in charges due to systematic 

differences in the markup of charges 

among LTCHs is taken into account. 

e. Treatment of Severity Levels in 

Developing the Proposed MS–LTC–DRG 

Relative Weights 

For purposes of determining the MS– 

LTC–DRG relative weights, under our 

historical methodology, there are three 

different categories of MS–DRGs based 

on volume of cases within specific MS– 

LTC–DRGs: (1) MS–LTC–DRGs with at 

least 25 applicable LTCH cases in the 

data used to calculate the relative 

weight, which are each assigned a 

unique relative weight; (2) low-volume 

MS–LTC–DRGs (that is, MS–LTC–DRGs 

that contain between 1 and 24 

applicable LTCH cases that are grouped 

into quintiles (as described below) and 

assigned the relative weight of the 

quintile; and (3) no-volume MS–LTC– 

DRGs that are cross-walked to other 

MS–LTC–DRGs based on the clinical 

similarities and assigned the relative 

weight of the cross-walked MS–LTC– 

DRG (as described in greater detail 

below). We are proposing to use 

applicable LTCH cases to establish the 

same volume-based categories to 

calculate the FY 2016 relative weights 

for LLTCH PPS standard Federal 

payment rate payments. This approach 

is consistent with our policies regarding 

the continued use of our existing 

methodology related to the treatment of 

severity levels as presented in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50172). 

We provide in-depth discussions of 

our proposed policy regarding weightsetting for proposed low-volume MS– 

LTC–DRGs in section VII.C.3.f. of the 

preamble of this proposed rule and for 

proposed no-volume MS–LTC–DRGs, 

under proposed Step 5 in section 

VII.C.3.g. of the preamble of this 

proposed rule.) Furthermore, in 

determining the proposed FY 2016 MS– 

LTC–DRG relative weights for LTCH 

PPS standard Federal payment rate 

payments, when necessary, we are 

proposing to make adjustments to 

account for nonmonotonicity, as 

discussed in greater detail below in 

proposed Step 6 of section VII.C.3.g. of 

the preamble of this proposed rule. We 

refer readers to the discussion in the FY 

2010 IPPS/RY 2010 LTCH PPS final rule 

for our rationale for including an 

adjustment for nonmonotonicity (74 FR 

43953 through 43954). 

f. Proposed Low-Volume MS–LTC– 

DRGs 

In order to account for proposed MS– 

LTC–DRGs for LTCH PPS Standard 

Federal payment rate cases with lowvolume (that is, with fewer than 25 

applicable LTCH cases), consistent with 

our existing methodology for purposes 


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of determining the FY 2015 MS–LTC– 

DRG relative weights, we are proposing 

to employ the quintile methodology for 

proposed low-volume MS–LTC–DRGs, 

such that we group the proposed ‘‘lowvolume MS–LTC–DRGs’’ (that is, 

proposed MS–LTC–DRGs that contain 

between 1 and 24 applicable LTCH 

cases into one of five categories 

(quintiles) based on average charges (67 

FR 55984 through 55995 and 72 FR 

47283 through 47288). In cases where 

the initial assignment of a proposed 

low-volume MS–LTC–DRG to a quintile 

results in nonmonotonicity within a 

base-DRG, we are proposing to make 

adjustments to the resulting low-volume 

MS–LTC–DRGs to preserve 

monotonicity, as discussed in detail 

below in section VII.C.3.g. (Step 6) of 

the preamble of this proposed rule. 

We identified 250 proposed MS–LTC– 

DRGs that contained between 1 and 24 

applicable LTCH cases. This list of 

proposed MS–LTC–DRGs was then 

divided into one of the proposed 5 lowvolume quintiles, each containing 50 

MS–LTC–DRGs (250/5 = 50). We 

assigned the proposed low-volume MS– 

LTC–DRGs to specific proposed lowvolume quintiles by sorting the 

proposed low-volume MS–LTC–DRGs 

in ascending order by average charge in 

accordance with our established 

methodology. Based on the data 

available for this proposed rule, the 

number of proposed MS–LTC–DRGs 

with less than 25 applicable LTCH cases 

was evenly divisible by 5. Therefore, it 

was not necessary to employ our 

historical methodology for determining 

which of the low-volume quintiles 

contain an additional low-volume MS– 

LTC–DRG. If the number of MS–LTC– 

DRGs with less than 25 applicable 

LTCH cases from the most recent data 

available for the final rule does not 

divide evenly, we are proposing to use 

our historical methodology for 

determining which quintiles would 

contain the additional MS–LTC–DRGs. 

For this proposed rule, after organizing 

the MS–LTC–DRGs by ascending order 

by average charge, we assigned the first 

fifth (1st through 50th) of proposed lowvolume MS–LTC–DRGs (with the lowest 

average charge) into proposed Quintile 

1. The 50 proposed MS–LTC–DRGs with 

the highest average charge cases were 

assigned into proposed Quintile 5. Table 

13A, listed in section VI. of the 

Addendum to this proposed rule and 

available via the Internet, lists the 

proposed composition of the proposed 

low-volume quintiles for MS–LTC– 

DRGs for FY 2016. 

Accordingly, in order to determine 

the proposed FY 2016 relative weights 

for the proposed MS–LTC–DRGs with 

low-volume, we are proposing to use the 

five low-volume quintiles described 

above. We determined a proposed 

relative weight and (geometric) average 

length of stay for each of the five 

proposed low-volume quintiles using 

the proposed methodology described in 

section VII.C.3.g. of the preamble of this 

proposed rule. We are proposing to 

assign the same proposed relative 

weight and average length of stay to 

each of the proposed low-volume MS– 

LTC–DRGs that make up an individual 

low-volume quintile. We note that, as 

this system is dynamic, it is possible 

that the number and specific type of 

MS–LTC–DRGs with a low-volume of 

applicable LTCH cases will vary in the 

future. Furthermore, we note that we 

will continue to monitor the volume 

(that is, the number of applicable LTCH 

cases) in the low-volume quintiles to 

ensure that our quintile assignments 

used in determining the MS–LTC–DRG 

relative weights for LTCH PPS standard 

Federal payment rate payments result in 

appropriate payment for LTCH cases 

that would be grouped to proposed lowvolume MS–LTC–DRGs and do not 

result in an unintended financial 

incentive for LTCHs to inappropriately 

admit these types of cases. 

g. Steps for Determining the Proposed 

FY 2016 MS–LTC–DRG Relative 

Weights 

In this proposed rule, we are 

proposing to use the same steps from 

our existing methodology to determine 

the proposed FY 2016 MS–LTC–DRG 

relative weights for LTCH PPS standard 

Federal payment rate payments. (For 

additional information on the original 

development of the steps in this 

methodology, and modifications to it 

since the adoption of the MS–LTC– 

DRGs, we refer readers to the August 30, 

2002 LTCH PPS final rule (67 FR 55989 

through 55995) and the FY 2010 IPPS/ 

RY 2010 LTCH PPS final rule (74 FR 

43951 through 43966).) As stated 

previously in this section, this approach 

is consistent with our policies regarding 

the continued use of our existing 

methodology, which was used to 

determine the FY 2015 MS–LTC–DRG 

relative weights as presented in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50173 through 50176). However, in 

doing so, we are proposing to use only 

applicable LTCH (as discussed in 

section VII.B.7.a. of the preamble of this 

proposed rule). 

In summary, to determine the 

proposed FY 2016 MS–LTC–DRG 

relative weights, we are proposing to 

group applicable LTCH cases to the 

appropriate proposed MS–LTC–DRG, 

while taking into account the proposed 

low-volume quintiles (as described 

above) and cross-walking proposed novolume MS–LTC–DRGs as described 

below. After establishing the 

appropriate proposed MS–LTC–DRG (or 

proposed low-volume quintile), we are 

proposing to calculate the FY 2016 

relative weights for LTCH PPS standard 

Federal payment rate payments by first 

removing statistical outliers and cases 

with a length of stay of 7 days or less 

(Steps 1 and 2 below). Next, we are 

proposing to adjust the number of 

applicable LTCH cases in each proposed 

MS–LTC–DRG (or proposed low-volume 

quintile) for the effect of SSO cases 

(Step 3 below). After removing 

statistical outliers (Step 1 below) and 

applicable LTCH cases with a length of 

stay of 7 days or less (Step 2 below), 

which are the SSO-adjusted applicable 

LTCH cases and corresponding charges, 

we are proposing to calculate ‘‘relative 

adjusted weights’’ for each proposed 

MS–LTC–DRG (or proposed low-volume 

quintile) using the HSRV method. 

Below we discuss in detail the steps for 

calculating the proposed FY 2016 MS– 

LTC–DRG relative weights for LTCH 

PPS standard Federal payment rate 

payments. 

Step 1—Remove statistical outliers. 

The first step in our proposed 

calculation of the proposed FY 2016 

MS–LTC–DRG relative weights for 

LTCH PPS standard Federal payment 

rate payments is to remove statistical 

outlier cases from applicable LTCH 

cases. Consistent with our historical 

relative weight methodology, we are 

proposing to continue to define 

statistical outliers as cases that are 

outside of 3.0 standard deviations from 

the mean of the log distribution of both 

charges per case and the charges per day 

for each MS–LTC–DRG. These statistical 

outliers are removed prior to calculating 

the proposed relative weights because 

we believe that they may represent 

aberrations in the data that distort the 

measure of average resource use. 

Including those LTCH cases in the 

calculation of the proposed relative 

weights for LTCH PPS standard Federal 

payment rate payments could result in 

an inaccurate relative weight that does 

not truly reflect relative resource use 

among those MS–LTC–DRGs. (For 

additional information on what would 

be removed in this step of the relative 

weight methodology, we refer readers to 

67 FR 55989 and 74 FR 43959.) 

Step 2—Remove cases with a length 

of stay of 7 days or less. 

The MS–LTC–DRG relative weights 

reflect the average of resources used on 

representative cases of a specific type. 

Generally, cases with a length of stay of 

7 days or less do not belong in a LTCH 


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because these stays do not fully receive 

or benefit from treatment that is typical 

in a LTCH stay, and full resources are 

often not used in the earlier stages of 

admission to a LTCH. If we were to 

include stays of 7 days or less in the 

computation of the FY 2016 MS–LTC– 

DRG relative weights, the value of many 

relative weights would decrease and, 

therefore, payments would decrease to a 

level that may no longer be appropriate. 

We do not believe that it would be 

appropriate to compromise the integrity 

of the payment determination for those 

LTCH cases that actually benefit from 

and receive a full course of treatment at 

a LTCH by including data from these 

very short stays. Therefore, consistent 

with our historical relative weight 

methodology, in determining the 

proposed FY 2016 MS–LTC–DRG 

relative weights for LTCH PPS standard 

Federal payment rate payments, we are 

further proposing to remove LTCH cases 

with a length of stay of 7 days or less 

from applicable LTCH cases. (For 

additional information on what would 

be removed in this step of the relative 

weight methodology, we refer readers to 

67 FR 55989 and 74 FR 43959.) 

Step 3—Adjust charges for the effects 

of SSOs. 

After removing statistical outliers and 

cases with a length of stay of 7 days or 

less, we are left with applicable LTCH 

cases that have a length of stay greater 

than or equal to 8 days. In this proposed 

rule, we refer to these cases as ‘‘trimmed 

applicable LTCH cases.’’ As the next 

step in the calculation of the proposed 

FY 2016 MS–LTC–DRG relative weights 

for LTCH PPS standard Federal payment 

rate payments, consistent with our 

historical approach, we are proposing to 

adjust each LTCH’s charges per 

discharge for those remaining cases for 

the effects of SSOs (as defined in 

§ 412.529(a) in conjunction with 

§ 412.503). Specifically, we are 

proposing to make this adjustment by 

counting an SSO case as a fraction of a 

discharge based on the ratio of the 

length of stay of the case to the average 

length of stay for the MS–LTC–DRG for 

non-SSO cases. This has the effect of 

proportionately reducing the impact of 

the lower charges for the SSO cases in 

calculating the average charge for the 

MS–LTC–DRG. This process produces 

the same result as if the actual charges 

per discharge of an SSO case were 

adjusted to what they would have been 

had the patient’s length of stay been 

equal to the average length of stay of the 

MS–LTC–DRG. 

Counting SSO cases as full LTCH 

cases with no adjustment in 

determining the proposed FY 2016 MS– 

LTC–DRG relative weights for LTCH 

PPS standard Federal payment rate 

payments would lower the proposed FY 

2016 MS–LTC–DRG relative weight for 

affected MS–LTC–DRGs because the 

relatively lower charges of the SSO 

cases would bring down the average 

charge for all cases within a MS–LTC– 

DRG. This would result in an 

‘‘underpayment’’ for non-SSO cases and 

an ‘‘overpayment’’ for SSO cases. 

Therefore, we are proposing to continue 

to adjust for SSO cases under § 412.529 

in this manner because it results in 

more appropriate payments for all LTCH 

PPS standard Federal payment rate 

cases. (For additional information on 

this step of the relative weight 

methodology, we refer readers to 67 FR 

55989 and 74 FR 43959.) 

Step 4—Calculate the proposed FY 

2016 MS–LTC–DRG relative weights on 

an iterative basis. 

Consistent with our historical relative 

weight methodology, we are proposing 

to then calculate the FY 2016 MS–LTC– 

DRG relative weights for LTCH PPS 

standard Federal payment rate 

payments using the HSRV methodology, 

which is an iterative process. First, for 

each case, we calculate a hospitalspecific relative charge value by 

dividing the charge per discharge after 

adjusting for SSOs of the LTCH case 

(from Step 3) by the average charge per 

SSO-adjusted discharge for the LTCH in 

which the case occurred. The resulting 

ratio is then multiplied by the LTCH’s 

case-mix index to produce an adjusted 

hospital-specific relative charge value 

for the case. An initial case-mix index 

value of 1.0 is used for each LTCH. 

For each proposed MS–LTC–DRG, we 

calculated the proposed FY 2016 

relative weight by dividing the SSOadjusted average of the hospital-specific 

relative charge values for applicable 

LTCH cases (that is, the sum of the 

hospital-specific relative charge value 

from above divided by the sum of 

equivalent cases from step 3 for each 

MS–LTC–DRG) for the proposed MS– 

LTC–DRG by the overall SSO-adjusted 

average hospital-specific relative charge 

value across all applicable LTCH cases 

for all LTCHs (that is, the sum of the 

hospital-specific relative charge value 

from above divided by the sum of 

equivalent applicable LTCH cases from 

step 3 for each MS–LTC–DRG). Using 

these recalculated MS–LTC–DRG 

relative weights, each LTCH’s average 

relative weight for all of its applicable 

LTCH cases (that is, its case-mix) is 

calculated by dividing the sum of all the 

LTCH’s MS–LTC–DRG relative weights 

by its total number of applicable LTCH 

cases. The LTCHs’ hospital-specific 

relative charge values (from above) are 

then multiplied by the hospital-specific 

case-mix indexes. The hospital-specific 

case-mix adjusted relative charge values 

are then used to calculate a new set of 

proposed MS–LTC–DRG relative 

weights across all LTCHs. This iterative 

process is continued until there is 

convergence between the relative 

weights produced at adjacent steps, for 

example, when the maximum difference 

was less than 0.0001. (We note that, 

although we are not proposing any 

changes to this step of our relative 

weight methodology in this proposed 

rule, we have made some minor changes 

to the description of this step to clarify 

the application of our existing policy.) 

Step 5—Determine a proposed FY 

2016 relative weight for MS–LTC–DRGs 

with no applicable LTCH cases. 

Using the trimmed applicable LTCH 

cases, we identified the proposed MS– 

LTC–DRGs for which there were no 

claims in the December 2014 update of 

the FY 2014 MedPAR file and, therefore, 

for which no charge data was available 

for these proposed MS–LTC–DRGs. 

Because patients with a number of the 

diagnoses under these proposed MS– 

LTC–DRGs may be treated at LTCHs, 

consistent with our historical 

methodology, we are generally 

proposing to assign a proposed relative 

weight to each of the proposed novolume MS–LTC–DRGs for LTCH PPS 

standard Federal payment rate cases 

based on clinical similarity and relative 

costliness (with the exception of 

‘‘transplant’’ proposed MS–LTC–DRGs, 

‘‘error’’ proposed MS–LTC–DRGs, and 

proposed MS–LTC–DRGs that indicate a 

principal diagnosis related to a 

psychiatric diagnosis or rehabilitation 

(referred to as the ‘‘psychiatric or 

rehabilitation’’ MS–LTC–DRGs), as 

discussed below). (For additional 

information on this step of the relative 

weight methodology, we refer readers to 

67 FR 55991 and 74 FR 43959 through 

43960.) 

We are proposing to cross-walk each 

proposed no-volume MS–LTC–DRG to 

another proposed MS–LTC–DRG for 

which we calculated a proposed relative 

weight (determined in accordance with 

the methodology described above). 

Then, the ‘‘no-volume’’ proposed MS– 

LTC–DRG would be assigned the same 

proposed relative weight (and average 

length of stay) of the proposed MS– 

LTC–DRG to which it was cross-walked 

(as described in greater detail below). 

Of the 758 proposed MS–LTC–DRGs 

for FY 2016, we identified 368 MS– 

LTC–DRGs for which there are no 

trimmed applicable LTCH cases (the 

number identified includes no trimmed 

applicable LTCH cases in the 8 

‘‘transplant’’ MS–LTC–DRGs, the 2 

‘‘error’’ MS–LTC–DRGs, and the 15 


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‘‘psychiatric or rehabilitation’’ MS– 

LTC–DRGs, which are discussed below). 

We are proposing to assign proposed 

relative weights to each of the 343 novolume proposed MS–LTC–DRGs that 

contained trimmed applicable LTCH 

cases based on clinical similarity and 

relative costliness to one of the 

remaining 390 (758 ¥ 368 = 390) 

proposed MS–LTC–DRGs for which we 

are able to propose relative weights 

based on the trimmed applicable LTCH 

cases in the FY 2014 MedPAR file data 

using the steps described above. (For the 

remainder of this discussion, we refer to 

the ‘‘cross-walked’’proposed MS–LTC– 

DRGs as the proposed MS–LTC–DRGs to 

which we cross-walked one of the 343 

‘‘no volume’’ proposed MS–LTC–DRGs.) 

Then, we are generally proposing to 

assign the 343 no-volume proposed MS– 

LTC–DRG the proposed relative weight 

of the proposed cross-walked MS–LTC– 

DRG. (As explained below in Step 6, 

when necessary, we make adjustments 

to account for nonmonotonicity.) 

We are proposing to cross-walk the 

no-volume proposed MS–LTC–DRG to a 

proposed MS–LTC–DRG for which we 

are able to propose relative weights 

based on the December 2014 update of 

the FY 2014 MedPAR file, and to which 

it is similar clinically in intensity of use 

of resources and relative costliness as 

determined by criteria such as care 

provided during the period of time 

surrounding surgery, surgical approach 

(if applicable), length of time of surgical 

procedure, postoperative care, and 

length of stay. (For more details on our 

process for evaluating relative 

costliness, we refer readers to the FY 

2010 IPPS/RY 2010 LTCH PPS final rule 

(73 FR 48543).) We believe in the rare 

event that there would be a few LTCH 

cases grouped to one of the no-volume 

MS–LTC–DRGs in FY 2015, the relative 

weights assigned based on the crosswalked MS–LTC–DRGs would result in 

an appropriate LTCH PPS payment 

because the crosswalks, which are based 

on clinical similarity and relative 

costliness, would be expected to 

generally require equivalent relative 

resource use. 

We then assigned the proposed 

relative weight of the cross-walked 

proposed MS–LTC–DRG as the 

proposed relative weight for the novolume proposed MS–LTC–DRG such 

that both of these proposed MS–LTC– 

DRGs (that is, the no-volume proposed 

MS–LTC–DRG and the proposed crosswalked MS–LTC–DRG) have the same 

proposed relative weight (and average 

length of stay) for FY 2016. We note 

that, if the proposed cross-walked MS– 

LTC–DRG had 25 applicable LTCH 

cases or more, its proposed relative 

weight (calculated using the 

methodology described in Steps 1 

through 4 above) is assigned to the novolume proposed MS–LTC–DRG as 

well. Similarly, if the proposed MS– 

LTC–DRG to which the no-volume 

proposed MS–LTC–DRG was crosswalked had 24 or less cases and, 

therefore, is designated to one of the 

proposed low-volume quintiles for 

purposes of determining the proposed 

relative weights, we assigned the 

proposed relative weight of the 

applicable proposed low-volume 

quintile to the no-volume proposed MS– 

LTC–DRG such that both of these 

proposed MS–LTC–DRGs (that is, the 

no-volume proposed MS–LTC–DRG and 

the proposed cross-walked MS–LTC– 

DRG) have the same proposed relative 

weight for FY 2016. (As we noted above, 

in the infrequent case where 

nonmonotonicity involving a no-volume 

proposed MS–LTC–DRG resulted, 

additional adjustments as described in 

Step 6 were required in order to 

maintain monotonically increasing 

proposed relative weights.) 

For this proposed rule, a list of the novolume proposed MS–LTC–DRGs and 

the proposed MS–LTC–DRGs to which 

each was cross-walked (that is, the 

proposed cross-walked MS–LTC–DRGs) 

for FY 2016 is shown in Table 13B, 

which is listed in section VI. of the 

Addendum to this proposed rule and is 

available via the Internet. 

To illustrate this methodology for 

determining the proposed relative 

weights for the proposed FY 2016 MS– 

LTC–DRGs with no applicable LTCH 

cases, we are providing the following 

example, which refers to the no-volume 

proposed MS–LTC–DRGs crosswalk 

information for FY 2016 provided in 

Table 13B. 

Example: There were no trimmed 

applicable LTCH cases in the FY 2014 

MedPAR file that we are proposing to 

use for this proposed rule for proposed 

MS–LTC–DRG 61 (Acute Ischemic 

Stroke with Use of Thrombolytic Agent 

with MCC). We determined that 

proposed MS–LTC–DRG 70 

(Nonspecific Cerebrovascular Disorders 

with MCC) is similar clinically and 

based on resource use to proposed MS– 

LTC–DRG 61. Therefore, we assigned 

the same proposed relative weight (and 

average length of stay) of proposed MS– 

LTC–DRG 70 of 0.9045 for FY 2016 to 

proposed MS–LTC–DRG 61 (we refer 

readers to Table 11, which is listed in 

section VI. of the Addendum to this 

proposed rule and is available via the 

Internet). 

Again, we note that, as this system is 

dynamic, it is entirely possible that the 

number of MS–LTC–DRGs with no 

volume will vary in the future. We are 

proposing to use the most recent 

available claims data to identify the 

trimmed applicable LTCH cases from 

which we will determine the proposed 

relative weights in this proposed rule. 

For FY 2016, consistent with our 

historical relative weight methodology, 

we are proposing to establish a relative 

weight of 0.0000 for the following 

transplant MS–LTC–DRGs: Heart 

Transplant or Implant of Heart Assist 

System with MCC (MS–LTC–DRG 1); 

Heart Transplant or Implant of Heart 

Assist System without MCC (MS–LTC– 

DRG 2); Liver Transplant with MCC or 

Intestinal Transplant (MS–LTC–DRG 5); 

Liver Transplant without MCC (MS– 

LTC–DRG 6); Lung Transplant (MS– 

LTC–DRG 7); Simultaneous Pancreas/ 

Kidney Transplant (MS–LTC–DRG 8); 

Pancreas Transplant (MS–LTC–DRG 10); 

and Kidney Transplant (MS–LTC–DRG 

652). This is because Medicare will only 

cover these procedures if they are 

performed at a hospital that has been 

certified for the specific procedures by 

Medicare and presently no LTCH has 

been so certified. At the present time, 

we include these eight transplant MS– 

LTC–DRGs in the GROUPER program 

for administrative purposes only. 

Because we use the same GROUPER 

program for LTCHs as is used under the 

IPPS, removing these MS–LTC–DRGs 

would be administratively burdensome. 

(For additional information regarding 

our treatment of transplant MS–LTC– 

DRGs, we refer readers to the RY 2010 

LTCH PPS final rule (74 FR 43964).) In 

addition, consistent with our historical 

policy, we are proposing to establish a 

relative weight of 0.0000 for the 2 

‘‘error’’ MS–LTC–DRGs (that is, MS– 

LTC–DRG 998 (Principal Diagnosis 

Invalid as Discharge Diagnosis) and 

MS–LTC–DRG 999 (Ungroupable)) 

because applicable LTCH cases grouped 

to these MS–LTC–DRGs cannot be 

properly assigned to an MS–LTC–DRG 

according to the grouping logic. 

Furthermore, for FY 2016, we are 

proposing to establish a proposed 

relative weight equal to the respective 

FY 2015 relative weight of the MS– 

LTC–DRGs for the following 

‘‘psychiatric or rehabilitation’’ proposed 

MS–LTC–DRGs: MS–LTC–DRG 876 

(O.R. Procedure with Principal 

Diagnoses of Mental Illness); MS–LTC– 

DRG 880 (Acute Adjustment Reaction & 

Psychosocial Dysfunction); MS–LTC– 

DRG 881 (Depressive Neuroses); MS– 

LTC–DRG 882 (Neuroses Except 

Depressive); MS–LTC–DRG 883 

(Disorders of Personality & Impulse 

Control); MS–LTC–DRG 884 (Organic 

Disturbances & Mental Retardation); 

MS–LTC–DRG 885 (Psychoses); MS– 


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LTC–DRG 886 (Behavioral & 

Developmental Disorders); MS–LTC– 

DRG 887 (Other Mental Disorder 

Diagnoses); MS–LTC–DRG 894 

(Alcohol/Drug Abuse or Dependence, 

Left Ama); MS–LTC–DRG 895 (Alcohol/ 

Drug Abuse or Dependence, with 

Rehabilitation Therapy); MS–LTC–DRG 

896 (Alcohol/Drug Abuse or 

Dependence, without Rehabilitation 

Therapy with MCC); MS–LTC–DRG 897 

(Alcohol/Drug Abuse or Dependence, 

without Rehabilitation Therapy without 

MCC); MS–LTC–DRG 945 

(Rehabilitation with CC/MCC); and MS– 

LTC–DRG 946 (Rehabilitation without 

CC/MCC). Under our proposals to 

implement the new dual-rate LTCH PPS 

payment structure required by statute, 

LTCH discharges that are grouped to 

these 15 ‘‘psychiatric and 

rehabilitation’’ proposed MS–LTC– 

DRGs would not meet the criteria for 

exclusion from the site neutral payment 

rate. Therefore, there are no applicable 

LTCH cases to use in calculating a 

proposed relative weight for these 

‘‘psychiatric and rehabilitation’’ 

proposed MS–LTC–DRGs. In other 

words, under our proposed 

implementation of the ‘‘criterion for a 

principal diagnosis relating to a 

psychiatric diagnosis or to 

rehabilitation’’ (as discussed in section 

VII.B.3.b. of the preamble of this 

proposed rule), any LTCH PPS 

discharges grouped to any of the 15 

‘‘psychiatric and rehabilitation’’ 

proposed MS–LTC–DRGs would always 

be paid at the site neutral payment rate, 

and, therefore, those proposed MS– 

LTC–DRGs would never include any 

LTCH cases that meet the criteria for 

exclusion from the site neutral payment 

rate. However, section 1886(m)(6)(B) of 

the Act establishes a transitional 

payment method for cases that will be 

paid at the site neutral payment rate for 

LTCH discharges occurring in cost 

reporting periods beginning during FY 

2016 or FY 2017. As discussed in detail 

in section VII.B.4.b. of the preamble of 

this proposed rule, for LTCH discharges 

occurring in cost reporting periods 

beginning on or after October 1, 2015, 

and on or before September 30, 2017 

(that is, discharges occurring in cost 

reporting periods beginning during FYs 

2016 and 2017), the transitional 

payment amount for site neutral 

payment rate cases would be a blended 

payment rate, which would be 

calculated as 50 percent of the 

applicable site neutral payment rate 

amount for the discharge and 50 percent 

of the applicable LTCH PPS standard 

Federal payment rate. Because the 

LTCH PPS standard Federal payment 

rate is based on the relative weight of 

the MS–LTC–DRG, in order to 

determine the proposed transitional 

blended payment for site neutral 

payment rate cases grouped to one of 

the ‘‘psychiatric or rehabilitation’’ MS– 

LTC–DRGs in FY 2016, we must assign 

a relative weight to these MS–LTC– 

DRGs, which we are proposing would 

be the FY 2015 relative weight. We 

believe that using the respective FY 

2015 relative weight for each of the 

‘‘psychiatric or rehabilitation’’ proposed 

MS–LTC–DRGs would result in 

appropriate payments for LTCH cases 

that would be paid at the site neutral 

payment rate under the transition policy 

provided by the statute because there 

are no clinically similar proposed MS– 

LTC–DRGs for which we were able to 

determine proposed relative weights 

based on applicable LTCH cases in the 

FY 2014 MedPAR file data using the 

steps described above. Furthermore, we 

believe that it would be administratively 

burdensome and introduce unnecessary 

complexity to the MS–LTC–DRG 

relative weight calculation to use the 

LTCH discharges in the MedPAR file 

data to calculate a relative weight for 

those 15 ‘‘psychiatric and 

rehabilitation’’ proposed MS–LTC– 

DRGs to be used for the sole purpose of 

determining half of the proposed 

transitional blended payment for site 

neutral payment rate cases during the 

transition period. 

Step 6—Adjust the proposed FY 2016 

MS–LTC–DRG relative weights to 

account for nonmonotonically 

increasing relative weights. 

As discussed earlier in this section, 

the MS–DRGs contain base DRGs that 

have been subdivided into one, two, or 

three severity of illness levels. Where 

there are three severity levels, the most 

severe level has at least one secondary 

diagnosis code that is referred to as an 

MCC (that is, major complication or 

comorbidity). The next lower severity 

level contains cases with at least one 

secondary diagnosis code that is a CC 

(that is, complication or comorbidity). 

Those cases without an MCC or a CC are 

referred to as ‘‘without CC/MCC.’’ When 

data do not support the creation of three 

severity levels, the base MS–DRG is 

subdivided into either two levels or the 

base MS–DRG is not subdivided. The 

two-level subdivisions could consist of 

the MS–DRG with CC/MCC and the 

MS–DRG without CC/MCC. 

Alternatively, the other type of twolevel subdivision may consist of the 

MS–DRG with MCC and the MS–DRG 

without MCC. 

In those base MS–LTC–DRGs that are 

split into either two or three severity 

levels, cases classified into the ‘‘without 

CC/MCC’’ MS–LTC–DRG are expected 

to have a lower resource use (and lower 

costs) than the ‘‘with CC/MCC’’ MS– 

LTC–DRG (in the case of a two-level 

split) or both the ‘‘with CC’’ and the 

‘‘with MCC’’ MS–LTC–DRGs (in the 

case of a three-level split). That is, 

theoretically, cases that are more severe 

typically require greater expenditure of 

medical care resources and will result in 

higher average charges. Therefore, in the 

three severity levels, relative weights 

should increase by severity, from lowest 

to highest. If the relative weights 

decrease as severity increases (that is, if 

within a base MS–LTC–DRG, an MS– 

LTC–DRG with CC has a higher relative 

weight than one with MCC, or the MS– 

LTC–DRG ‘‘without CC/MCC’’ has a 

higher relative weight than either of the 

others), they are nonmonotonic. We 

continue to believe that utilizing 

nonmonotonic relative weights to adjust 

Medicare payments would result in 

inappropriate payments because the 

payment for the cases in the higher 

severity level in a base MS–LTC–DRG 

(which are generally expected to have 

higher resource use and costs) would be 

lower than the payment for cases in a 

lower severity level within the same 

base MS–LTC–DRG (which are generally 

expected to have lower resource use and 

costs). Therefore, in determining the 

proposed FY 2016 MS–LTC–DRG 

relative weights for LTCH PPS standard 

Federal payment rate payments in this 

proposed rule, consistent with our 

historical methodology, we are 

proposing to combine proposed MS– 

LTC–DRG severity levels within a base 

MS–LTC–DRG for the purpose of 

computing a relative weight when 

necessary to ensure that monotonicity is 

maintained. For a comprehensive 

description of our existing methodology 

to adjust for nonmonotonicity, we refer 

readers to the FY 2010 IPPS/RY 2010 

LTCH PPS final rule (74 FR 43964 

through 43966). Any adjustments for 

nonmonotonicity that were made in 

determining the proposed FY 2016 MS– 

LTC–DRG relative weights in this 

proposed rule by applying this 

methodology are denoted in Table 11, 

which is listed in section VI. of the 

Addendum to this final rule and is 

available via the Internet on the CMS 

Web site. 

Step 7—Calculate the proposed FY 

2016 MS–LTC–DRG reclassification and 

recalibration budget neutrality factor. 

In accordance with the regulations at 

§ 412.517(b) (in conjunction with 

§ 412.503), the annual update to the 

MS–LTC–DRG classifications and 

relative weights is done in a budget 

neutral manner such that estimated 

aggregate LTCH PPS payments would be 


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unaffected, that is, would be neither 

greater than nor less than the estimated 

aggregate LTCH PPS payments that 

would have been made without the MS– 

LTC–DRG classification and relative 

weight changes. (For a detailed 

discussion on the establishment of the 

budget neutrality requirement for the 

annual update of the MS–LTC–DRG 

classifications and relative weights, we 

refer readers to the RY 2008 LTCH PPS 

final rule (72 FR 26881 and 26882).) 

The MS–LTC–DRG classifications and 

relative weights are updated annually 

based on the most recent available 

LTCH claims data to reflect changes in 

relative LTCH resource use (§ 412.517(a) 

in conjunction with § 412.503). Under 

the budget neutrality requirement at 

§ 412.517(b), for each annual update, the 

MS–LTC–DRG relative weights are 

uniformly adjusted to ensure that 

estimated aggregate payments under the 

LTCH PPS would not be affected (that 

is, decreased or increased). Consistent 

with that provision, we are proposing to 

update the proposed FY 2016 MS–LTC– 

DRG classifications and relative weights 

for LTCH PPS standard payment rate 

payments based on the most recent 

available LTCH data for applicable 

LTCH cases, and to apply a budget 

neutrality adjustment in determining 

the FY 2016 MS–LTC–DRG relative 

weights. 

To ensure budget neutrality in the 

update to the MS–LTC–DRG 

classifications and relative weights 

under § 412.517(b), we are proposing to 

continue to use our established two-step 

budget neutrality methodology. As 

discussed previously in this section, 

this approach is consistent with our 

general policies regarding the continued 

use of our existing methodologies, as 

presented in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50175 through 

50176) 

In this proposed rule, in the first step 

of our proposed MS–LTC–DRG budget 

neutrality methodology, for FY 2016, we 

are proposing to calculate and apply a 

normalization factor to the recalibrated 

proposed relative weights (the result of 

Steps 1 through 6 above) to ensure that 

estimated payments are not affected by 

changes in the composition of case 

types or the proposed changes to the 

classification system. That is, the 

normalization adjustment is intended to 

ensure that the recalibration of the 

proposed MS–LTC–DRG relative 

weights (that is, the process itself) 

neither increases nor decreases the 

average case-mix index. 

To calculate the normalization factor 

for FY 2016 (the first step of our 

proposed budget neutrality 

methodology), we are proposing to use 

the following three steps: (1.a.) We use 

the most recent available applicable 

LTCH cases from the most recent 

available data (that is, LTCH discharges 

from the FY 2014 MedPAR file) and 

group them using the proposed FY 2016 

GROUPER (proposed Version 33) and 

the recalibrated proposed FY 2016 MS– 

LTC–DRG relative weights (determined 

in Steps 1 through 6 above) to calculate 

the average case-mix index; (1.b.) we 

group the same applicable LTCH cases 

(as are used in Step 1.a.) using the FY 

2015 GROUPER (Version 32) and FY 

2015 MS–LTC–DRG relative weights 

and calculated the average case-mix 

index; and (1.c.) we compute the ratio 

of these average case-mix indexes by 

dividing the average CMI for FY 2015 

(determined in Step 1.b.) by the average 

case-mix index for FY 2016 (determined 

in Step 1.a.). As a result, in determining 

the proposed MS–LTC–DRG relative 

weights for FY 2016, each recalibrated 

proposed MS–LTC–DRG relative weight 

is multiplied by 1.28176 (determined in 

Step 1.c.) in the first step of the 

proposed budget neutrality 

methodology, which produces 

‘‘normalized relative weights.’’ 

In the second step of our proposed 

MS–LTC–DRG budget neutrality 

methodology, we calculate a second 

proposed budget neutrality factor 

consisting of the ratio of estimated 

aggregate FY 2016 LTCH PPS standard 

Federal payment rate payments for 

applicable LTCH cases (the sum of all 

calculations under Step 1.a. above) after 

reclassification and recalibration to 

estimated aggregate payments for FY 

2015 LTCH PPS standard Federal 

payment rate payments for applicable 

LTCH cases before reclassification and 

recalibration (that is, the sum of all 

calculations under Step 1.b. above). 

That is, for this proposed rule, for FY 

2016, under the second step of the 

proposed budget neutrality 

methodology, we are proposing to 

determine the proposed budget 

neutrality adjustment factor using the 

following three steps: (2.a.) We simulate 

estimated total FY 2016 LTCH PPS 

standard Federal payment rate 

payments for applicable LTCH cases 

using the normalized proposed relative 

weights for FY 2016 and proposed 

GROUPER Version 33 (as described 

above); (2.b.) we simulate estimated 

total FY 2015 LTCH PPS standard 

Federal payment rate payments for 

applicable LTCH cases using the FY 

2015 GROUPER (Version 32) and the FY 

2015 MS–LTC–DRG relative weights in 

Table 11 of the Addendum to the FY 

2015 IPPS/LTCH PPS final rule 

available on the Internet; and (2.c.) we 

calculate the ratio of these estimated 

total payments by dividing the value 

determined in Step 2.b. by the value 

determined in Step 2.a. In determining 

the proposed FY 2016 MS–LTC–DRG 

relative weights, each normalized 

proposed relative weight is then 

multiplied by a budget neutrality factor 

of 0.996599 (the value determined in 

Step 2.c.) in the second step of the 

proposed budget neutrality 

methodology to determine the proposed 

budget neutral FY 2016 relative weight 

for each proposed MS–LTC–DRG. 

Accordingly, in determining the 

proposed FY 2016 MS–LTC–DRG 

relative weights in this proposed rule, 

consistent with our existing 

methodology, we are proposing to apply 

a normalization factor of 1.28176 and a 

budget neutrality factor of 0.996599 

(computed as described above). Table 

11, which is listed in section VI. of the 

Addendum to this proposed rule and is 

available via the Internet, lists the 

proposed MS–LTC–DRGs and their 

respective proposed relative weights, 

geometric mean length of stay, fivesixths of the geometric mean length of 

stay (used to identify SSO cases under 

§ 412.529(a)), and the ‘‘IPPS Comparable 

Thresholds’’ (used in determining SSO 

payments under § 412.529(c)(3)), for FY 

2016 (and reflect both the proposed 

normalization factor of 1.28176 and the 

proposed budget neutrality factor of 

0.996599). 

D. Proposed Changes to the LTCH PPS 

Standard Federal Payment Rates for FY 

2016 

1. Overview of Development of the 

LTCH PPS Standard Federal Payment 

Rates 

The basic methodology for 

determining LTCH PPS standard 

Federal prospective payment rates is set 

forth at § 412.515 through § 412.536. In 

this section, we discuss the factors that 

we are proposing to use to update the 

LTCH PPS standard Federal payment 

rate for FY 2016, that is, effective for 

LTCH discharges occurring on or after 

October 1, 2015 through September 30, 

2016. As previously discussed, under 

the dual-rate LTCH PPS payment 

structure required by statute, we are 

proposing that, beginning with FY 2016, 

only LTCH discharges that meet the 

criteria for exclusion from the site 

neutral payment rate would be paid 

based on the LTCH PPS standard 

Federal payment rate specified at 

§ 412.523. (For additional details on our 

proposals related to the dual-rate LTCH 

PPS payment structure required by 

statute, we refer readers to section VII.C. 

of the preamble of this proposed rule.) 


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For details on the development of the 

initial FY 2003 standard Federal rate, 

we refer readers to the August 30, 2002 

LTCH PPS final rule (67 FR 56027 

through 56037). For subsequent updates 

to the LTCH PPS standard Federal rate 

as implemented under § 412.523(c)(3), 

we refer readers to the following final 

rules: RY 2004 LTCH PPS final rule (68 

FR 34134 through 34140); RY 2005 

LTCH PPS final rule (68 FR 25682 

through 25684); RY 2006 LTCH PPS 

final rule (70 FR 24179 through 24180); 

RY 2007 LTCH PPS final rule (71 FR 

27819 through 27827); RY 2008 LTCH 

PPS final rule (72 FR 26870 through 

27029); RY 2009 LTCH PPS final rule 

(73 FR 26800 through 26804); FY 2010 

IPPS/RY 2010 LTCH PPS final rule (74 

FR 44021 through 44030); FY 2011 

IPPS/LTCH PPS final rule (75 FR 50443 

through 50444); FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51769 through 

51773); FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53479 through 53481); FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50760 through 50765); and FY 2015 

IPPS/LTCH PPS final rule (79 FR 50176 

through 50180). 

In this FY 2016 proposed rule, we 

present our proposals related to the 

proposed annual update to the LTCH 

PPS standard Federal payment rate for 

FY 2016, which includes the proposed 

annual market basket update. Consistent 

with our historical practice of using the 

best data available, we also are 

proposing to use more recent data, if 

available, to determine the FY 2016 

annual market basket update to the 

LTCH PPS standard Federal payment 

rate in the final rule. 

The application of the proposed 

update to the LTCH PPS standard 

Federal payment rate for FY 2016 is 

presented in section V.A. of the 

Addendum to this proposed rule. The 

components of the proposed annual 

market basket update to the LTCH PPS 

standard Federal payment rate for FY 

2016 are discussed below, including the 

reduction to the annual update for 

LTCHs that fail to submit quality 

reporting data for fiscal year FY 2016 as 

required by the statute (as discussed in 

section VII.D.2.c. of the preamble of this 

proposed rule). In addition, as discussed 

in section V.A. of the Addendum of this 

proposed rule, we are proposing to 

make an adjustment to the LTCH PPS 

standard Federal payment rate to 

account for the estimated effect of the 

changes to the area wage level 

adjustment for FY 2016 on estimated 

aggregate LTCH PPS payments, in 

accordance with § 412.523(d)(4). 

2. Proposed FY 2016 LTCH PPS Annual 

Market Basket Update 

a. Overview 

Historically, the Medicare program 

has used a market basket to account for 

price increases in the services furnished 

by providers. The market basket used 

for the LTCH PPS includes both 

operating and capital-related costs of 

LTCHs because the LTCH PPS uses a 

single payment rate for both operating 

and capital-related costs. As discussed 

in the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53468 through 53476), we 

adopted the newly created FY 2009- 

based LTCH-specific market basket for 

use under the LTCH PPS beginning in 

FY 2013. For additional details on the 

historical development of the market 

basket used under the LTCH PPS, we 

refer readers to the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53467 through 

53468). 

Section 3401(c) of the Affordable Care 

Act provides for certain adjustments to 

any annual update to the LTCH PPS 

standard Federal payment rate and 

refers to the timeframes associated with 

such adjustments as a ‘‘rate year’’ 

(which are discussed in more detail in 

section VII.C.2.b. of the preamble of this 

final rule.) We note that because the 

annual update to the LTCH PPS 

policies, rates, and factors now occurs 

on October 1, we adopted the term 

‘‘fiscal year’’ (FY) rather than ‘‘rate 

year’’ (RY) under the LTCH PPS 

beginning October 1, 2010, to conform 

with the standard definition of the 

Federal fiscal year (October 1 through 

September 30) used by other PPSs, such 

as the IPPS (75 FR 50396 through 

50397). Although the language of 

sections 3004(a), 3401(c), 10319, and 

1105(b) of the Affordable Care Act refers 

to years 2010 and thereafter under the 

LTCH PPS as ‘‘rate year,’’ consistent 

with our change in the terminology used 

under the LTCH PPS from ‘‘rate year’’ to 

‘‘fiscal year,’’ for purposes of clarity, 

when discussing the annual update for 

the LTCH PPS standard Federal 

payment rate, including the provisions 

of the Affordable Care Act, we use 

‘‘fiscal year’’ rather than ‘‘rate year’’ for 

2011 and subsequent years. 

b. Proposed Revision of Certain Market 

Basket Updates as Required by the 

Affordable Care Act 

Section 1886(m)(3)(A) of the Act, as 

added by section 3401(c) of the 

Affordable Care Act, specifies that, for 

rate year 2010 and each subsequent rate 

year through 2019, any annual update to 

the LTCH PPS standard Federal 

payment rate shall be reduced: 

• For rate year 2010 through 2019, by 

the ‘‘other adjustment’’ specified in 

sections 1886(m)(3)(A)(ii) and (m)(4) of 

the Act; and 

• For rate year 2012 and each 

subsequent year, by the productivity 

adjustment (which we refer to as ‘‘the 

multifactor productivity (MFP) 

adjustment’’) described in section 

1886(b)(3)(B)(xi)(II) of the Act. 

Section 1886(m)(3)(B) of the Act 

provides that the application of 

paragraph (3) of section 1886(m) of the 

Act may result in the annual update 

being less than zero for a rate year, and 

may result in payment rates for a rate 

year being less than such payment rates 

for the preceding rate year. 

Section 1886(b)(3)(B)(xi)(II) of the Act 

defines the MFP adjustment as equal to 

the 10-year moving average of changes 

in annual economy-wide, private 

nonfarm business multifactor 

productivity (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, calendar 

year, cost reporting period, or other 

annual period). Under our methodology, 

the end of the 10-year moving average 

of changes in the MFP coincides with 

the end of the appropriate FY update 

period. In addition, the MFP adjustment 

that is applied in determining any 

annual update to the LTCH PPS 

standard Federal payment rate is the 

same adjustment that is required to be 

applied in determining the applicable 

percentage increase under the IPPS 

under section 1886(b)(3)(B)(i) of the Act 

as they are both based on a fiscal year. 

We refer readers to section IV.A.1. of the 

preamble of this proposed rule for more 

information on the proposed FY 2016 

MFP adjustment. 

c. Proposed Adjustment to the Annual 

Update to the LTCH PPS Standard 

Federal Payment Rate Under the LongTerm Care Hospital Quality Reporting 

Program (LTCH QRP) 

In accordance with section 1886(m)(5) 

of the Act, as added by section 3004(a) 

of the Affordable Care Act, the Secretary 

established the Long-Term Care 

Hospital Quality Reporting Program 

(LTCH QRP). The reduction in the 

annual update to the LTCH PPS 

standard Federal payment rate for 

failure to report quality data under the 

LTCH QRP for FY 2014 and subsequent 

fiscal years is codified under 

§ 412.523(c)(4) of the regulations. (As 

previously noted, although the language 

of section 3004(a) of the Affordable Care 

Act refers to years 2011 and thereafter 

under the LTCH PPS as ‘‘rate year,’’ 

consistent with our change in the 

terminology used under the LTCH PPS 

from ‘‘rate year’’ to ‘‘fiscal year,’’ for 


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purposes of clarity, when discussing the 

annual update for the LTCH PPS, 

including the provisions of the 

Affordable Care Act, we use ‘‘fiscal 

year’’ rather than ‘‘rate year’’ for 2011 

and subsequent years.) The LTCH QRP, 

as required for FY 2014 and beyond by 

section 1886(m)(5)(A)(i) of the Act, 

applies a 2.0 percentage point reduction 

to any update under § 412.523(c)(3) for 

an LTCH that does not submit quality 

reporting data to the Secretary in 

accordance with section 1886(m)(5)(C) 

of the Act with respect to such a year 

(that is, in the form and manner and at 

the time specified by the Secretary 

under the LTCH QRP) 

(§ 412.523(c)(4)(i)). Section 

1886(m)(5)(A)(ii) of the Act provides 

that the application of the 2.0 

percentage points reduction may result 

in an annual update that is less than 0.0 

for a year, and may result in LTCH PPS 

payment rates for a year being less than 

such LTCH PPS payment rates for the 

preceding year (§ 412.523(c)(4)(iii)). 

Furthermore, section 1886(m)(5)(B) of 

the Act specifies that the 2.0 percentage 

points reduction is applied in a 

noncumulative manner, such that any 

reduction made under section 

1886(m)(5)(A) of the Act shall apply 

only with respect to the year involved, 

and shall not be taken into account in 

computing the LTCH PPS payment 

amount for a subsequent year 

(§ 412.523(c)(4)(ii)). We discuss the 

application of the 2.0 percentage point 

reduction under § 412.523(c)(4)(i) in our 

discussion of the annual market basket 

update to the LTCH PPS standard 

Federal payment rate for FY 2016 in 

section VII.D.2.e. of the preamble of this 

proposed rule. (For additional 

information on the history of the LTCH 

QRP, including the statutory authority 

and the selected measures, we refer 

readers to section VIII.C. of the 

preamble of this proposed rule.) 

d. Proposed Market Basket Under the 

LTCH PPS for FY 2016 

Under the authority of section 123 of 

the BBRA as amended by section 307(b) 

of the BIPA, we adopted a newly created 

FY 2009-based LTCH-specific market 

basket for use under the LTCH PPS 

beginning in FY 2013. The FY 2009- 

based LTCH-specific market basket is 

based solely on the Medicare cost report 

data submitted by LTCHs and, therefore, 

specifically reflects the cost structures 

of only LTCHs. For additional details on 

the development of the FY 2009-based 

LTCH-specific market basket, we refer 

readers to the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53467 through 53476). 

For FY 2016, we are proposing to 

continue to use the FY 2009-based 

LTCH-specific market basket to update 

the LTCH PPS for FY 2016. We continue 

to believe that the FY 2009-based LTCHspecific market basket appropriately 

reflects the cost structure of LTCHs for 

the reasons discussed when we adopted 

the FY 2009-based LTCH-specific 

market basket for use under the LTCH 

PPS in the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53467 through 53476). 

e. Proposed Annual Market Basket 

Update for LTCHs for FY 2016 

Consistent with our historical 

practice, we estimate the market basket 

update and the MFP adjustment based 

on IGI’s forecast using the most recent 

available data. Based on IGI’s first 

quarter 2015 forecast, the proposed FY 

2016 full market basket estimate for the 

LTCH PPS using the FY 2009-based 

LTCH-specific market basket is 2.7 

percent. The current estimate of the 

MFP adjustment for FY 2016 based on 

IGI’s first quarter 2015 forecast is 0.6 

percent, as discussed in section IV.A. of 

the preamble of this proposed rule. In 

addition, consistent with our historical 

practice, we are proposing that if more 

recent data become subsequently 

available (for example, a more recent 

estimate of the market basket and the 

MFP adjustment), we would use such 

data, if appropriate, to determine the FY 

2016 market basket update and the MFP 

adjustment in the final rule. 

For FY 2016, section 1886(m)(3)(A)(i) 

of the Act requires that any annual 

update to the LTCH PPS standard 

Federal payment rate be reduced by the 

productivity adjustment (‘‘the MFP 

adjustment’’) described in section 

1886(b)(3)(B)(xi)(II) of the Act. 

Consistent with the statute, we are 

proposing to reduce the full proposed 

FY 2016 market basket update by the 

proposed FY 2016 MFP adjustment. To 

determine the proposed market basket 

update for LTCHs for FY 2016, as 

reduced by the MFP adjustment, 

consistent with our established 

methodology, we subtract the proposed 

FY 2016 MFP adjustment from the 

proposed FY 2016 market basket 

update. Furthermore, sections 

1886(m)(3)(A)(ii) and 1886(m)(4)(E) of 

the Act requires that any annual update 

to the LTCH PPS standard Federal 

payment rate for FY 2016 be reduced by 

the ‘‘other adjustment’’ described in 

paragraph (4), which is 0.2 percentage 

point for FY 2016. Therefore, following 

application of the productivity 

adjustment, we are further proposing to 

reduce the adjusted proposed market 

basket update (that is, the full proposed 

market basket increase less the proposed 

MFP adjustment) by the ‘‘other 

adjustment’’ specified by sections 

1886(m)(3)(A)(ii) and 1886(m)(4) of the 

Act. (For additional details on our 

established methodology for adjusting 

the market basket increase by the MFP 

and the ‘‘other adjustment’’ required by 

the statute, we refer readers to the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51771).) 

For FY 2016, section 1886(m)(5) of the 

Act requires that for LTCHs that do not 

submit quality reporting data as 

required under the LTCHQR Program, 

any annual update to an LTCH PPS 

standard Federal payment rate, after 

application of the adjustments required 

by section 1886(m)(3) of the Act, shall 

be further reduced by 2.0 percentage 

points. Therefore, the proposed update 

to the LTCH PPS standard Federal 

payment rate for FY 2016 for LTCHs 

that fail to submit quality reporting data 

under the LTCH QRP, the full proposed 

LTCH PPS market basket increase 

estimate, subject to an adjustment based 

on changes in economy-wide 

productivity (‘‘the MFP adjustment’’) as 

required under section 1886(m)(3)(A)(i) 

of the Act and an additional reduction 

required by sections 1886(m)(3)(A)(ii) 

and 1886(m)(4) of the Act, will also be 

further reduced by 2.0 percentage 

points. 

In this proposed rule, in accordance 

with the statute, we are reducing the 

proposed FY 2016 full market basket 

estimate of 2.7 percent (based on IGI’s 

first quarter 2015 forecast of the FY 

2009-based LTCH-specific market 

basket) by the proposed FY 2016 MFP 

adjustment of 0.6 percentage point 

(based on IGI’s first quarter 2015 

forecast). Following application of the 

productivity adjustment, the adjusted 

proposed market basket update of 2.1 

percent (2.7 percent minus 0.6 

percentage point) is then reduced by 0.2 

percentage point, as required by 

sections 1886(m)(3)(A)(ii) and 

1886(m)(4)(E) of the Act. Therefore, in 

this proposed rule, under the authority 

of section 123 of the BBRA as amended 

by section 307(b) of the BIPA, we are 

proposing to establish a proposed 

annual market basket update under to 

the LTCH PPS standard Federal 

payment rate for FY 2016 of 1.9 percent 

(that is, the most recent estimate of the 

LTCH PPS market basket proposed 

update of 2.7 percent, less the proposed 

MFP adjustment of 0.6 percentage point, 

and less the 0.2 percentage point 

required under section 1886(m)(4)(E) of 

the Act). Accordingly, consistent with 

our proposal, we are proposing to revise 

§ 412.523(c)(3) by adding a new 

paragraph (xii), which specifies that the 

LTCH PPS standard Federal payment 

rate for FY 2016 is the LTCH PPS 

standard Federal payment rate for the 


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previous LTCH PPS year updated by 1.9 

percent, and as further adjusted, as 

appropriate, as described in 

§ 412.523(d). For LTCHs that fail to 

submit quality reporting data under the 

LTCH QRP, under § 412.523(c)(3)(xi) in 

conjunction with § 412.523(c)(4), we are 

proposing to further reduce the 

proposed annual update to the LTCH 

PPS standard Federal payment rate by 

2.0 percentage points in accordance 

with section 1886(m)(5) of the Act. 

Accordingly, consistent with our 

proposal, we are proposing to establish 

a proposed annual update to the LTCH 

PPS standard Federal payment rate of 

-0.1 percent (that is, 1.9 percent minus 

2.0 percentage points) for FY 2016 for 

LTCHs that fail to submit quality 

reporting data as required under the 

LTCH QRP. As stated above, consistent 

with our historical practice, we are 

proposing that if more recent data 

become subsequently available (for 

example, a more recent estimate of the 

market basket and the MFP adjustment) 

we would use such data, if appropriate, 

to establish an annual update to the 

LTCH PPS standard Federal payment 

rate for FY 2016 under 

§ 412.523(c)(3)(xii) in the final rule. (We 

note that we also are adjusting the 

proposed FY 2016 LTCH PPS standard 

Federal payment rate by an area wage 

level budget neutrality factor in 

accordance with § 412.523(d)(4) (as 

discussed in section V.B.5. of the 

Addendum of this proposed rule).) 

E. Moratoria on the Establishment of 

LTCHs and LTCH Satellite Facilities and 

on the Increase in the Number of Beds 

in Existing LTCHs and LTCH Satellite 

Facilities 

Section 1206(b)(2) of Public Law 113– 

67, as amended by section 112(b) of the 

Protecting Access to Medicare Act of 

2014 (PAMA) (Pub. L. 113–93), 

established ‘‘new’’ statutory moratoria 

on the establishment of new LTCHs and 

LTCH satellite facilities and on the 

increase in the number of hospital beds 

in existing LTCHs and LTCH satellite 

facilities. For a discussion on our 

implementation of these moratoria, we 

refer readers to the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50189 through 

50193). Since the implementation of 

these LTCH PPS policy moratoria, we 

have been informed that some confusion 

may exist regarding the exceptions to 

the moratorium on the establishment of 

new LTCH and LTCH satellite facilities, 

as well as the application of the 

moratorium on an increase in the 

number of beds in existing LTCH and 

LTCH satellite facilities. 

Under existing regulations at 42 CFR 

412.23(e)(6), we specify that, to qualify 

for an exception under the moratorium 

to establish a new LTCH or LTCH 

satellite facility during the timeframe 

between April 1, 2014, and September 

30, 2017, a hospital or entity must meet 

the following criteria: 

• The hospital or entity must have 

begun its qualifying period for payment 

as an LTCH in accordance with 

§ 412.23(e). 

• The hospital or entity must have a 

binding written agreement with an 

outside, unrelated party for the actual 

construction, renovation, lease, or 

demolition for an LTCH, and must have 

expended before April 1, 2014, at least 

10 percent of the estimated cost of the 

project or, if less, $2,500,000. 

• The hospital or entity must have 

obtained an approved certificate of need 

in a State where one is required. 

We believe that the existing regulation 

text regarding the moratorium on the 

establishment and classification of new 

LTCHs and LTCH satellite facilities 

could be misread as requiring 

fulfillment of all three conditions in 

order to qualify for an exception to the 

moratorium on the establishment of new 

LTCH and LTCH satellite facilities. This 

was not our intent, and we acknowledge 

that implementing the moratorium in 

that manner would have been directly 

contradictory to the statutory 

requirement. Technically, while we did 

not explicitly specify in the regulations 

text under § 412.23(e)(6) that only one of 

the listed criteria had to be met in order 

to qualify for an exception to the 

moratorium on the establishment of new 

LTCHs and LTCH satellite facilities (the 

language text states ‘‘as applicable’’), we 

clearly stated it in the preamble of the 

FY 2015 IPPS/LTCH PPS final rule. (We 

refer readers to the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50189 through 

50193).) In addition, the requirement 

that one of the three exceptions had to 

be met in order to qualify for an 

exception to the moratorium was also 

indicated in our proposal to implement 

the initial application of the moratorium 

during the FY 2009 rulemaking cycle. 

(We refer readers to the FY 2009 IPPS/ 

LTCH PPS final rule (73 FR 29705).) 

As we stated in the preamble of the 

FY 2015 IPPS/LTCH PPS final rule), the 

provisions in the new moratorium are 

nearly identical to the language in the 

prior ‘‘expired’’ moratorium under 

section 114(d) of MMSEA (Pub. L. 110– 

173). As also noted, the mechanics of 

exceptions to the new and expired 

moratoria on the establishment of new 

LTCHs and LTCH satellite facilities are 

analogous. Therefore, except as noted, 

to the extent that the new and expired 

moratoria were consistent, we proposed 

and adopted the identical 

implementation mechanisms. To 

minimize the confusion that may exist 

as a result of the existing regulations 

text, we are proposing to revise the 

regulations under § 412.23(e)(6)(ii) to 

more accurately convey the established 

policy that only one of the statutory 

conditions, as applicable, needs to be 

met in order to qualify for the exception 

to the new moratorium on the 

establishment of new LTCH and LTCH 

satellite facilities. 

We have become aware of some 

confusion concerning what constitutes 

the ‘‘estimated cost of the project’’ with 

regard to the second exception. To 

alleviate confusion, we are clarifying 

our longstanding policy on what 

constitutes the ‘‘estimated cost of the 

project.’’ In discussing this exception in 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50189 through 50193), we noted 

that the ‘‘cost of the project’’ included 

the activities (plural) that were 

enumerated in the first prong of the 

exception. Those enumerated activities 

included ‘‘the actual construction, 

renovation, lease, or demolition for a 

long-term care hospital.’’ That is, our 

policy is that the sum total of any costs 

associated with any of the enumerated 

activities that comprised the project as 

a whole (with the project being the 

establishment of a new LTCH or a new 

LTCH satellite facility) would be 

considered in determining whether the 

facility met the amount specified in the 

statute. In using an ‘‘or’’ in this list of 

activities, we intended to acknowledge 

that any one project may or may not 

include every element listed (for 

example, new construction may not 

include any demolition), but if it does 

include an element, our policy is that 

the cost of that element and the costs of 

any other of the listed elements in the 

project are to be summed to determine 

the total cost of the project. Therefore, 

under our longstanding policy, when 

determining whether 10 percent of the 

estimated cost of the project had been 

expended prior to the start of the 

moratorium, the ‘‘project’’ is the 

establishment of a new LTCH or LTCH 

satellite facility, not any one element 

that, when combined with other 

elements listed in the first prong, would 

lead to the establishment of the LTCH 

or LTCH satellite facility. For example, 

if an entity has expended 10 percent of 

the costs of demolition, but that amount 

is less than both 10 percent of the 

estimated cost of the project, and less 

than the $2,500,000.00 ceiling amount, 

the entity would not qualify for this 

exception to the moratorium. 

In addition, we are taking this 

opportunity to provide additional 

clarification on our policy concerning 


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the moratorium on increases in the 

number of beds in existing LTCH and 

LTCH satellite facilities. As we noted in 

the FY 2015 IPPS/LTCH PPS final rule, 

while the expired moratorium 

specifically included an exception to 

the moratorium on the increase in the 

number of beds in existing LTCHs and 

LTCH satellite facilities, the new 

moratorium under section 1206(b)(2)(B) 

of Public Law 113–67 expressly noted 

that the exceptions to the expired 

moratoria would not apply under the 

‘‘new’’ moratoria. Further amendments 

made by section 112(b) of Public Law 

113–93, which create the exceptions to 

the current moratoria, did not change 

that express omission (79 FR 50189 

through 50193). Given the lack of any 

exception to the new moratorium on 

increasing the number of beds in an 

existing LTCH or LTCH satellite facility, 

an LTCH may not increase the total 

number of Medicare certified beds 

beyond the number that existed prior to 

April 1, 2014, including when an 

existing LTCH meets one of the 

exceptions to the moratorium on the 

establishment of a new LTCH satellite 

facility. An LTCH satellite facility’s beds 

historically have been, and continue to 

be, counted as the LTCH’s beds. 

Therefore, under our existing regulation 

at § 412.23(e)(7)(iii), an existing LTCH 

cannot, through meeting the criteria for 

an exception to the new moratorium on 

the establishment of a new LTCH 

satellite facility, increase its total 

number of Medicare certified beds by 

establishing any number beds at the 

new LTCH satellite facility that would 

result in the total number of Medicare 

certified beds in that LTCH exceeding 

what existed prior to April 1, 2014. That 

is, if an existing LTCH meets one of the 

statutory exceptions and opens a new 

LTCH satellite facility during the 

moratorium, that new LTCH satellite 

facility’s beds must come from the 

movement of beds in existence prior to 

April 1, 2014, from other locations of 

the existing LTCH to the new LTCH 

satellite facility. This requirement also 

applies to any remote locations that may 

be established by an existing LTCH 

during the moratorium on new beds. 

F. Proposed Changes to Average Length 

of Stay Criterion Under Public Law 113– 

67 (§ 412.23) 

We are proposing to revise § 412.23 to 

implement the statutory changes to the 

calculation of the average length of stay 

for an LTCH under section 1206(a)(3) of 

Public Law 113–67. As required by 

section 1861(ccc) of the Act, in order for 

a hospital to be classified as an LTCH, 

it must maintain an average length of 

stay of greater than 25 days as 

calculated by the Secretary (or meet the 

requirements of clause (II) of section 

1886(d)(1)(B)(iv) of the Act). Currently, 

the Medicare average length of stay is 

calculated, in accordance with 

§ 412.23(e)(3) of the regulations, by 

dividing the total number of covered 

and noncovered Medicare inpatient 

days by the total number of Medicare 

discharges. This calculation currently 

includes Medicare inpatient days and 

discharges that are paid under a 

Medicare Advantage (MA) plan. (For a 

full discussion of the inclusion of MA 

days in the average length of stay 

calculation, we refer readers to the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51774).) 

Section 1206(a)(3)(A) of Public Law 

113–67 specifies that, in general, for 

discharges occurring in cost reporting 

periods beginning on or after October 1, 

2015, applicable total Medicare 

inpatient days and discharges that are 

paid at the site neutral payment rate 

(discussed in section VII.B. of the 

preamble of this proposed rule), or for 

which payments are made under an MA 

plan, are to be excluded from the 

calculation of an LTCH’s average length 

of stay. In addition, section 

1206(a)(3)(B) of Public Law 113–67 

further requires that the exclusion of 

these inpatient days and discharges 

from the average length of stay 

calculation shall not apply to an LTCH 

that was classified as a subsection (d) 

hospital (as defined in section 

1886(d)(1)(B) the Act) as of December 

10, 2013. Therefore, under the broad 

authority conferred upon the Secretary 

under section 123(a)(1) of the BBRA, as 

amended by section 307(b) of the BIPA 

and in accordance with section 1206(a) 

of Public Law 113–67, we are proposing 

to revise § 412.23 of the regulations to 

incorporate the statutory changes to the 

average length of stay calculation 

required by section 1206(a) of Public 

Law 113–67. Specifically, we are 

proposing to revise § 412.23 by adding 

a new paragraph (e)(3)(vi) to specify that 

Medicare inpatient days and discharges 

paid at the site neutral payment rate or 

under an MA plan will not be included 

in the calculation of an LTCH’s average 

length of stay. Furthermore, we 

proposing to add new paragraph 

(e)(3)(vii) to § 412.23 to specify that the 

provisions of the proposed new 

paragraph (vi) will not apply to an 

LTCH that was classified as a subsection 

(d) hospital (as defined in section 

1886(d)(1)(B) the Act) as of December 

10, 2013, consistent with the statute. 

VIII. Quality Data Reporting 

Requirements for Specific Providers 

and Suppliers 

We seek to promote higher quality 

and more efficient healthcare for 

Medicare beneficiaries. This effort is 

supported by the adoption of widely 

agreed-upon quality measures. We have 

worked with relevant stakeholders to 

define quality measures for most 

settings and to measure various aspects 

of care for most Medicare beneficiaries. 

These measures assess structural aspects 

of care, clinical processes, patient 

experiences with care, care 

coordination, and improving patient 

outcomes. 

We have implemented quality 

reporting programs for multiple care 

settings, including: 

• Hospital inpatient services under 

the Hospital Inpatient Quality Reporting 

(IQR) Program (formerly referred to as 

the Reporting Hospital Quality Data for 

Annual Payment Update (RHQDAPU) 

Program); 

• Hospital outpatient services under 

the Hospital Outpatient Quality 

Reporting (OQR) Program (formerly 

referred to as the Hospital Outpatient 

Quality Data Reporting Program (HOP 

QDRP)); 

• Care furnished by physicians and 

other eligible professionals under the 

Physician Quality Reporting System 

(PQRS, formerly referred to as the 

Physician Quality Reporting Program 

Initiative (PQRI)); 

• Inpatient rehabilitation facilities 

under the Inpatient Rehabilitation 

Facility Quality Reporting Program (IRF 

QRP); 

• Long-term care hospitals under the 

Long-Term Care Hospital Quality 

Reporting Program (LTCH QRP) (also 

referred to as the LTCHQR Program); 

• PPS-exempt cancer hospitals under 

the PPS-Exempt Cancer Hospital 

Quality Reporting (PCHQR) Program; 

• Ambulatory surgical centers under 

the Ambulatory Surgical Center Quality 

Reporting (ASCQR) Program; 

• Inpatient psychiatric facilities 

under the Inpatient Psychiatric 

Facilities Quality Reporting (IPFQR) 

Program; 

• Home health agencies under the 

home health quality reporting program 

(HH QRP); and, 

• Hospice facilities under the Hospice 

Quality Reporting Program. 

We have also implemented the EndStage Renal Disease Quality Incentive 

Program and Hospital VBP Program 

(described further below) that link 

payment to performance. 

In implementing the Hospital IQR 

Program and other quality reporting 


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programs, we have focused on measures 

that have high impact and support CMS 

and HHS priorities for improved quality 

and efficiency of care for Medicare 

beneficiaries. Our goal for the future is 

to align the clinical quality measure 

requirements of the Hospital IQR 

Program with various other Medicare 

and Medicaid programs, including those 

authorized by the Health Information 

Technology for Economic and Clinical 

Health (HITECH) Act, so that the 

reporting burden on providers will be 

reduced. As appropriate, we will 

consider the adoption of clinical quality 

measures with electronic specifications 

so that the electronic collection of 

performance information is a seamless 

component of care delivery. 

Establishing such a system will require 

interoperability between EHRs and CMS 

data collection systems, additional 

infrastructure development on the part 

of hospitals and CMS, and adoption of 

standards for capturing, formatting, and 

transmitting the data elements that 

make up the measures. However, once 

these activities are accomplished, 

adoption of measures that rely on data 

obtained directly from EHRs will enable 

us to expand the Hospital IQR Program 

measure set with less cost and reporting 

burden to hospitals. We believe that in 

the near future, collection and reporting 

of data elements through EHRs will 

greatly simplify and streamline 

reporting for various CMS quality 

reporting programs, and that hospitals 

will be able to switch primarily to EHRbased data reporting for many measures 

that are currently manually chartabstracted and submitted to CMS for the 

Hospital IQR Program. 

We also have implemented a Hospital 

VBP Program under section 1886(o) of 

the Act, described in the Hospital 

Inpatient VBP Program final rule (76 FR 

26490 through 26547). We most recently 

adopted additional policies for the 

Hospital VBP Program in section IV.I. of 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50048 through 50087). Under the 

Hospital VBP Program, hospitals receive 

value-based incentive payments based 

on their performance with respect to 

performance standards for a 

performance period for the fiscal year 

involved. The measures under the 

Hospital VBP Program must be selected 

from the measures (other than 

readmission measures) specified under 

the Hospital IQR Program as required by 

section 1886(o)(2)(A) of the Act. 

In selecting measures for the Hospital 

IQR Program, we are mindful of the 

conceptual framework we have 

developed for the Hospital VBP 

Program. Given that measures adopted 

for the Hospital VBP Program must first 

have been specified under the Hospital 

IQR Program, these two programs are 

linked and the reporting infrastructure 

for the programs overlap. We view the 

Hospital VBP Program as the next step 

in promoting higher quality care for 

Medicare beneficiaries by transforming 

Medicare from a passive payer of claims 

into an active purchaser of quality 

healthcare for its beneficiaries. Valuebased purchasing is an important step to 

revamping how care and services are 

paid for, moving increasingly toward 

rewarding better value, outcomes, and 

innovations. 

We also view the Hospital-Acquired 

Condition (HAC) payment adjustment 

program authorized by section 1886(p) 

of the Act, as added by section 3008 of 

the Affordable Care Act, and the 

Hospital VBP Program, as related but 

separate efforts to reduce HACs. The 

Hospital VBP Program is an incentive 

program that awards payments to 

hospitals based on quality performance 

on a wide variety of measures, while the 

HAC Reduction Program creates a 

payment adjustment resulting in 

payment reductions for poorly 

performing hospitals based on their 

rates of HACs. 

In the preamble of this proposed rule, 

we are proposing changes to the 

following Medicare quality reporting 

systems: 

• In section VIII.A., the Hospital IQR 

Program. 

• In section VIII.B., the PCHQR 

Program. 

• In section VIII.C., the LTCH QRP. 

In addition, in section VIII.D. of the 

preamble of this proposed rule, we are 

proposing changes to the Medicare EHR 

Incentive Program for eligible hospitals 

and CAHs. 

A. Hospital Inpatient Quality Reporting 

(IQR) Program 

1. Background 

a. History of the Hospital IQR Program 

We refer readers to the FY 2010 IPPS/ 

RY 2010 LTCH PPS final rule (74 FR 

43860 through 43861) and the FY 2011 

IPPS/LTCH PPS final rule (75 FR 50180 

through 50181) for detailed discussions 

of the history of the Hospital IQR 

Program, including the statutory history, 

and to the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50217 through 50249) 

for the measures we have adopted for 

the Hospital IQR measure set through 

the FY 2017 payment determination and 

subsequent years. 

b. Maintenance of Technical 

Specifications for Quality Measures 

The technical specifications for the 

Hospital IQR Program measures, or links 

to Web sites hosting technical 

specifications, are contained in the 

CMS/The Joint Commission (TJC) 

Specifications Manual for National 

Hospital Quality Measures 

(Specifications Manual). This 

Specifications Manual is posted on the 

QualityNet Web site at http:// 

www.qualitynet.org/. We generally 

update the Specifications Manual on a 

semiannual basis and include in the 

updates detailed instructions and 

calculation algorithms for hospitals to 

use when collecting and submitting data 

on required measures. These 

semiannual updates are accompanied by 

notifications to users, providing 

sufficient time between the change and 

the effective date in order to allow users 

to incorporate changes and updates to 

the specifications into data collection 

systems. 

The technical specifications for the 

HCAHPS patient experience of care 

survey are contained in the current 

HCAHPS Quality Assurance Guidelines 

manual available at the HCAHPS Web 

site, http://www.hcahpsonline.org. We 

maintain the HCAHPS technical 

specifications by updating the HCAHPS 

Quality Assurance Guidelines manual 

annually, and include detailed 

instructions on survey implementation, 

data collection, data submission and 

other relevant topics. As necessary, 

HCAHPS Bulletins are issued to provide 

notice of changes and updates to 

technical specifications in HCAHPS 

data collection systems. 

Many of the quality measures used in 

different Medicare and Medicaid 

reporting programs are endorsed by the 

National Quality Forum (NQF). As part 

of its regular maintenance process for 

endorsed performance measures, the 

NQF requires measure stewards to 

submit annual measure maintenance 

updates and undergo maintenance of 

endorsement review every three years. 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50202 

through 50203) for additional detail on 

the measure maintenance process. 

We believe that it is important to have 

in place a subregulatory process to 

incorporate nonsubstantive updates to 

the measure specifications for measures 

we have adopted for the Hospital IQR 

Program so that these measures remain 

up-to-date. We refer readers to the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53504 through 53505) and the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50203) 

for our policy for using the 

subregulatory process to make nonsubstantive updates to measures used 

for the Hospital IQR Program. We 

recognize that some changes made to 

NQF-endorsed measures undergoing 


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maintenance review are substantive in 

nature and might not be appropriate for 

adoption using a subregulatory process. 

We will continue to use rulemaking to 

adopt substantive updates made to 

measures we have adopted for the 

Hospital IQR Program. 

c. Public Display of Quality Measures 

Section 1886(b)(3)(B)(viii)(VII) of the 

Act was amended by the Deficit 

Reduction Act (DRA) of 2005. Section 

5001(a) of the DRA requires that the 

Secretary establish procedures for 

making information regarding measures 

submitted available to the public after 

ensuring that a hospital has the 

opportunity to review its data before 

they are made public. We refer readers 

to the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50776 through 50778) for a 

more detailed discussion about public 

display of quality measures. We are not 

proposing to change our current policy 

of reporting data from the Hospital IQR 

Program as soon as it is feasible on CMS 

Web sites such as the Hospital Compare 

Web site http://www.medicare.gov/ 

hospitalcompare and/or the interactive 

https://data.medicare.gov Web site, after 

a preview period. 

The Hospital Compare Web site is an 

interactive Web tool that assists 

beneficiaries by providing information 

on hospital quality of care to those who 

need to select a hospital. For more 

information on measures reported to 

Hospital Compare, we refer readers to 

the Web site at: http:// 

www.medicare.gov/hospitalcompare. 

Other information not reported to 

Hospital Compare may be made 

available on other CMS Web sites such 

as http://www.cms.hhs.gov/ 

HospitalQualityInits/ or https:// 

data.medicare.gov. 

2. Process for Retaining Previously 

Adopted Hospital IQR Program 

Measures for Subsequent Payment 

Determinations 

We refer readers to the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53512 

through 53513), for our finalized 

measure retention policy. When we 

adopt measures for the Hospital IQR 

Program beginning with a particular 

payment determination, these measures 

are automatically adopted for all 

subsequent payment determinations 

unless we propose to remove, suspend, 

or replace the measures. 

We are not proposing any changes to 

our policy for retaining previously 

adopted measures for subsequent 

payment determinations. 

3. Removal and Suspension of Hospital 

IQR Program Measures 

a. Considerations in Removing Quality 

Measures From the Hospital IQR 

Program 

As discussed above, we generally 

retain measures from the previous year’s 

Hospital IQR Program measure set for 

subsequent years’ measure sets except 

when we specifically propose to 

remove, suspend, or replace a measure. 

We refer readers to the FY 2011 IPPS/ 

LTCH PPS final rule (75 FR 50185) and 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50203 through 50204) for more 

information on the criteria we consider 

for removing quality measures. We also 

take into account the views of the 

Measure Applications Partnership 

(MAP) when determining when a 

measure should be removed, and we 

strive to eliminate redundancy of 

similar measures (77 FR 53505 through 

53506). In the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50203 through 50204), 

we also finalized our proposal to clarify 

the criteria for determining when a 

measure is ‘‘topped out.’’ We are not 

proposing any changes to the two 

criteria that we use to determine 

whether or not a measure is ‘‘topped 

out.’’ 

We use these previously adopted 

measure removal criteria to help 

evaluate when we should propose a 

measure for removal. However, we 

continue to believe that there are 

circumstances in which a measure that 

meets criteria for removal should be 

retained regardless, because the 

drawbacks of removing a measure could 

be outweighed by other benefits to 

retaining the measure. Therefore, 

because of the continued need to 

balance benefits and drawbacks as well 

as our desire to increase transparency, 

we are proposing additional factors to 

consider for measure removal and also 

include factors to consider in order to 

retain measures. 

Specifically, we are proposing to take 

into consideration the following 

additional factors in determining 

whether a measure should be removed: 

• Feasibility to implement the 

measure specifications. 

In addition, we are proposing to 

remove one of the factors (‘‘Availability 

of alternative measures with a stronger 

relationship to patient outcomes’’) we 

take into consideration when 

determining whether to remove 

measures, because it is duplicates 

another factor (‘‘The availability of a 

measure that is more strongly associated 

with desired patient outcomes for the 

particular topic’’). 

We are also proposing to take into 

consideration the following factors in 

determining whether a measure should 

be retained: 

• Measure aligns with National 

Quality Strategy or CMS Quality 

Strategy goals; 

• Measure aligns with other CMS 

programs, including other quality 

reporting programs, or the EHR 

Incentive Program; and 

• Measure supports efforts to move 

facilities towards reporting electronic 

measures 

For example, we may consider 

retaining a measure that is statistically 

‘‘topped-out’’ in order to align with the 

Medicare EHR Incentive Program. 

Below is a table of newly proposed and 

previously adopted factors that we 

would take into consideration in 

removing or retaining measures: 

FACTORS CMS CONSIDERS IN REMOVING OR RETAINING MEASURES

Measure Removal Factors 

1. Measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in performance can no 

longer be made (‘‘topped-out’’ measures). 

2. A measure does not align with current clinical guidelines or practice. 

3. The availability of a more broadly applicable measure (across settings, populations, or the availability of a measure that is more proximal in 

time to desired patient outcomes for the particular topic). 

4. Performance or improvement on a measure does not result in better patient outcomes. 

5. The availability of a measure that is more strongly associated with desired patient outcomes for the particular topic. 

6. Collection or public reporting of a measure leads to negative unintended consequences other than patient harm. 

7. It is not feasible to implement the measure specifications *. 


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FACTORS CMS CONSIDERS IN REMOVING OR RETAINING MEASURES—Continued 

‘‘Topped-Out’’ Criteria 

1.• Statistically indistinguishable performance at the 75th and 90th percentiles; and 

• Truncated coefficient of variation ≤0.10. 

Measure Retention Factors 

1. Measure aligns with other CMS and HHS policy goals.* 

2. Measure aligns with other CMS programs, including other quality reporting programs, or the EHR Incentive Program. 

3. Measure supports efforts to move facilities towards reporting electronic measures. 

* Consideration proposed in this FY 2016 IPPS/LTCH PPS proposed rule. 

We note that these removal/retention 

factors continue to be considerations 

taken into account when deciding 

whether or not to remove measures; but 

they are not firm requirements. 

We are inviting public comments on 

our proposal. 

b. Proposed Removal of Hospital IQR 

Program Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

We are proposing to remove the 

following nine measures, either in their 

entirety or just the chart-abstracted 

form, from the Hospital IQR Program 

measure set for the FY 2018 payment 

determination and subsequent years: 

STK–01: Venous Thromboembolism 

(VTE) Prophylaxis (NQF #0434), STK– 

06: Discharged on Statin Medication 

(NQF #0439), STK–08: Stroke Education 

(NQF endorsement removed), VTE–1: 

Venous Thromboembolism Prophylaxis 

(NQF #0371), VTE–2: Intensive Care 

Unit Venous Thromboembolism 

Prophylaxis (NQF #0372), VTE–3: 

Venous Thromboembolism Patients 

with Anticoagulation Overlap Therapy 

(NQF #0373), IMM–1: Pneumococcal 

Immunization (NQF #1653), AMI–7a: 

Fibrinolytic Therapy Received Within 

30 Minutes of Hospital Arrival (NQF 

#0164), and SCIP–Inf–4: Cardiac 

Surgery Patients with Controlled 

Postoperative Blood Glucose (NQF 

#0300). 

(1) STK–01, STK–06, STK–08, VTE–1, 

VTE–2, and VTE–3 

We are proposing to remove the chartabstracted versions of STK–01, STK–06, 

STK–08, VTE–1, VTE–2, and VTE–3 

because these measures are ‘‘toppedout.’’ However, we are proposing to 

retain STK–06, STK–08, VTE–1, VTE–2, 

and VTE–3 as electronic clinical quality 

measures for the FY 2018 payment 

determination and subsequent years. As 

we state above in section VIII.A.3.a. of 

the preamble of this proposed rule, in 

our discussion of factors we consider in 

removing or retaining a measure, 

‘‘topped-out’’ status is only one of many 

factors which we consider. 

In balancing the benefits and 

disadvantages of removing or retaining 

a measure, we believe that the benefits 

of retaining the electronic versions of 

these measures outweigh the possible 

disadvantages. Specifically, we believe 

that while these measures are 

statistically ‘‘topped-out,’’ retaining the 

electronic versions of the measures is 

beneficial because they align the 

Hospital IQR Program with the 

Medicare EHR Incentive Program. In 

addition, retaining the electronic 

version of the measures would allow us 

to monitor the effectiveness of measure 

reporting by EHRs and help to 

familiarize hospitals with reporting 

electronically specified measures to 

CMS under the Hospital IQR Program. 

Our data show that the electronically 

specified versions of these measures are 

reported with non-zero values by as 

many as 2,864 hospitals attesting under 

2014 Meaningful Use and that hospitals 

report on the full range of available 

electronic clinical quality measures, 

indicating the value of variety. 

Accordingly, we know that EHRs are 

certified to these measures, and that 

hospitals do indeed report them. The 

available data suggest that retaining 

STK–06, STK–08, VTE–1, VTE–2, and 

VTE–3 as electronic clinical quality 

measures furthers CMS’ high priority 

goal to enable the electronic reporting of 

quality data and to align the Hospital 

IQR and EHR Incentive Programs. 

We also believe that reporting 

electronic clinical quality measures 

presents minimal burden on hospitals as 

compared to their chart-abstracted 

equivalents and that retaining the 

electronically specified versions of these 

measures is appropriate until we fully 

understand the differences between the 

chart-abstracted and electronic versions 

of quality measures. In the FY 2014 

IPPS/LTCH PPS final rule (78 FR 50808) 

we stated that we do not believe that the 

measures, in their electronically 

specified form, are substantively 

different than their chart-abstracted 

form, although we recognized that the 

EHR-based extraction methodology is 

different from the chart-abstraction data 

collection methodology. 

However, CMS now recognizes that 

although the intent of a measure is the 

same whether it is reported via chartabstraction or electronically, the 

submission modes are not the same and 

measure rates may be different. 

As described in the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50258), we 

have only heard anecdotal comments 

about actual performance level 

differences between the two modes of 

collection. We do not have sufficient 

data to be able to confirm these 

comments, but in the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50273), we 

finalized a proposal to conduct a 

validation pilot test for electronically 

specified measures, which we intend to 

complete in 2015. Therefore, the results 

of this pilot are not yet available. As we 

have stated in the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53555), 

determining the equivalence of 

electronic clinical quality measures and 

chart-abstracted measures would require 

extensive testing given that the data for 

the Hospital IQR Program supports 

public reporting for both the Hospital 

IQR and Hospital VBP Programs. Due to 

the reasons described above, we believe 

it is appropriate to retain the 

electronically specified version of these 

6 measures at this time. 

We are inviting public comment on 

our proposals. 

(2) IMM–2 Influenza Immunization 

(NQF #1659) 

One additional measure, IMM–2, has 

been determined to be statistically 

‘‘topped-out;’’ however, after 

considering the benefits and 

disadvantages of removing or retaining 

this measure, we are retaining this 

measure in the Hospital IQR Program 

measure set for the FY 2018 payment 

determination and subsequent years, 

because the benefits outweigh the 

disadvantages. One of the factors that 

we consider when determining whether 

to remove or retain a measure is 

whether a measure aligns with National 

Quality Strategy (NQS) or CMS Quality 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24558 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

79The Centers for Disease Control and 

Prevention: Key Facts About Seasonal Flu Vaccine. 

Retrieved from: http://www.cdc.gov/flu/protect/

keyfacts.htm. 

80MMWR October 12, 2012. Available at http:// 

www.cdc.gov/mmwr/PDF/wk/mm6140.pdf. 

Accessed on October 31, 2012. 

81MMWR September 2014. Available at http://

www.cdc.gov/mmwr/pdf/wk/mm6337.pdf. 

82CDC: Pneumococcal Disease. Retrieved from: 

http://www.cdc.gov/pneumococcal/about/

prevention.html. 

Strategy goals. Currently, IMM–2 is the 

only Hospital IQR Program measure to 

address the Best Practices to Enable 

Healthy Living NQS Priority and CMS 

Quality Strategy goal. In addition, IMM– 

2 supports the NQS priorities and CMS 

Quality Strategy goals to promote 

effective interventions to prevent and 

reduce the leading causes of mortality.79

(3) Removal of Immunization 1 (IMM– 

1) Pneumococcal Immunization (NQF 

#1653) 

We adopted the IMM–1 

Pneumococcal Immunization measure 

(NQF #1653) for the FY 2014 payment 

determination and subsequent years 

with data collection beginning with 

January 1, 2012 discharges (75 FR 

50211). In October 2012, subsequent to 

the beginning of IMM–1 data collection 

on January 1, 2012, the Advisory 

Committee on Immunization Practices 

(ACIP) published new guidelines on 

pneumococcal vaccination.80 With the 

publication of the new ACIP guidelines, 

IMM–1, as specified in the Hospital IQR 

Program, was no longer compliant with 

current clinical guidelines. 

As part of our efforts to re-specify 

IMM–1 to account for the many 

potential scenarios that must be 

considered when determining if 

pneumococcal vaccination is 

appropriate, we determined that it was 

not feasible to implement the measure 

specifications that incorporated the new 

guidelines given their complexity. 

Specifically, the October 2012 ACIP 

guidelines recommended the routine 

use of 13-valent pneumococcal 

conjugate (PCV13) vaccine for adults 

aged ≥19 years with certain comorbid 

conditions, and that PCV13 should be 

administered to eligible adults in 

addition to the 23-valent pneumococcal 

polysaccharide vaccine (PPSV23) that 

was currently recommended for these 

groups of adults. The timing of 

vaccination with PCV13 and PPSV23 is 

dependent upon if and when an 

individual has received the other 

vaccine. 

In order to implement the measure 

consistent with these new guidelines, 

providers would need reliable, detailed 

data on: (1) Whether or not a 

pneumococcal vaccine was previously 

administered, (2) which type of 

pneumococcal vaccine (PCV13 vs. 

PPSV23) was administered, and (3) 

when it was administered. When 

considering possible clinical scenarios 

of screening and vaccinating for 

pneumonia, current chart and electronic 

data do not consistently allow for 

successful abstraction of these varied 

and detailed historical facts, all of 

which are needed to appropriately 

administer a pneumococcal vaccine. 

We believe that the measure, as 

updated by ACIP guidelines, would 

burden hospitals with data abstraction 

and yield results with only questionable 

meaningfulness and reliability. We 

outlined these pneumococcal 

vaccination implementation issues in 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50780 through 50781), and 

suspended data collection for IMM–1 

until further notice. 

Since the suspension of IMM–1, ACIP 

again updated its 2012 guidelines in 

September 2014.81 In reviewing the 

updated 2014 guidelines, we held 

discussions with other HHS agencies to 

identify implementation strategies for 

these updated guidelines. However, we 

were still unable to identify a consistent 

data source, such as a national 

immunization registry, that is available 

to hospitals which would provide 

sufficient patient-level clinical 

information to ensure that hospitals 

would be able to accurately and reliably 

determine whether they were following 

the guidelines. There continues to be a 

lack of detailed and reliable patient 

level data on prior pneumococcal 

vaccination that is readily available to 

all hospitals. Without detailed, reliable, 

and readily available data for hospitals, 

it will be difficult to determine if the 

pneumococcal vaccinations are 

appropriately administered. 

In determining whether to remove the 

IMM–1 measure, we considered the 

factors stated above in section 

VIII.A.3.a. of the preamble of this 

proposed rule, in our discussion of 

considerations for the removal and 

retention of quality measures from the 

Hospital IQR Program. Based on the 

continued lack of ready access to 

comprehensive patient-level 

immunization data by hospital staff and 

the continued infeasibility to implement 

or align this measure with current 

clinical guidelines or practice, we are 

proposing to remove this measure from 

the Hospital IQR Program. We 

emphasize that, despite the proposed 

removal of the IMM–1 measure from the 

Hospital IQR Program, we understand 

and value the role pneumococcal 

vaccines play in preventing 

pneumococcal disease 82 and we expect 

hospitals to continue to provide 

pneumococcal vaccinations for their 

hospital populations as appropriate. 

We are inviting public comments on 

this proposal to remove IMM–1 from the 

Hospital IQR Program beginning in CY 

2016 for the FY 2018 payment 

determination and subsequent years. 

(4) Removal of AMI–7a Fibrinolytic 

Therapy Received Within 30 Minutes of 

Hospital Arrival Measure (NQF #0164) 

Our evaluation of the most recently 

available data shows that AMI–7a is not 

widely reported by hospitals, and 

according to the most recent data 

available, hospitals reporting this 

measure have less than the required 

number of cases to be publicly reported. 

In determining whether to remove AMI– 

7a as a chart-abstracted measure, we 

considered the factors stated in section 

VIII.A.3.a. of the preamble of this 

proposed rule in our discussion of 

considerations for the removal and 

retention of quality measures from the 

Hospital IQR Program. We are proposing 

to remove AMI–7a as a chart-abstracted 

measure beginning in CY 2016 for the 

FY 2018 payment determination and 

subsequent years because performance 

on this measure does not result in better 

patient outcomes. Specifically, measure 

data are infrequently reported, as most 

acute myocardial infarction patients 

receive percutaneous coronary 

intervention instead of fibrinolytic 

therapy. In addition, we believe that the 

burden of requiring all hospitals to 

report data on this measure, when only 

a minority of facilities report enough 

cases to be publicly reported, outweighs 

the benefits of retaining the chartabstracted version of this measure. 

However, we are proposing to retain 

AMI–7a as an electronic clinical quality 

measure. We believe that once 

electronic capture of the measure is 

possible, the time and resources for 

electronic reporting should be 

significantly less as compared to manual 

abstraction. In addition, as discussed in 

section VIII.A.3.a. of the preamble of 

this proposed rule, retaining the 

electronically specified version of a 

measure allows us to support the 

alignment of the Hospital IQR Program 

and the Medicare EHR Incentive 

Program. In addition, retaining this 

measure will both allow us to monitor 

the effectiveness of measure reporting 

by EHRs and help familiarize hospitals 

with reporting electronically specified 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24559 

83Optimal glycemic research for 6 a.m. blood 

glucose control shows a weak correlation between 

optimal glycemic goals and better outcomes related 

to morbidity, mortality and length of stay, 

suggesting that this type of metric may not be valid. 

LaPar FJ, Isbell JM, Kern JA, Ailawadi G, Kron IL. 

Surgical Care Improvement Project measure for 

postoperative glucose control should not be used as 

a measure of quality after cardiac surgery. J Thorac 

Cardiovasc Surg 2014;147:1041–8. 

84Lazar HL, McDonnell M, Chipkin SR, Furnary 

AP, Engelman RM, Sadhu AR et al. The Society of 

Thoracic Surgeons Practice Guideline Series: Blood 

Glucose Management During Adult Cardiac 

Surgery. Ann Thorac Surg 2009; 87: 663–9. 

85LaPar FJ, Isbell JM, Kern JA, Ailawadi G, Kron 

IL. Surgical Care Improvement Project measure for 

postoperative glucose control should not be used as 

a measure of quality after cardiac surgery. J Thorac 

Cardiovasc Surg 2014;147:1041–8. 

86Harold L. Lazar HL, McDonnell ME, Chipkin 

SR, Furnary AP, Engelman RM, Sadhu AR, Bridges 

CR and Haan CK. The Society of Thoracic Surgeons 

Practice Guideline Series: Blood Glucose 

Management During Adult Cardiac Surgery. Ann 

Thorac Surg 2009;87:663–9. 

87Harold L. Lazar HL, McDonnell ME, Chipkin 

SR, Furnary AP, Engelman RM, Sadhu AR, Bridges 

CR and Haan CK. The Society of Thoracic Surgeons 

Practice Guideline Series: Blood Glucose 

Management During Adult Cardiac Surgery. Ann 

Thorac Surg 2009;87:663–9. 

measures under the Hospital IQR 

Program. 

We are inviting public comments on 

our proposal to remove the chartabstracted version of AMI–7a but retain 

the electronic version for the CY 2016/ 

FY 2018 payment determination and 

subsequent years. 

(5) Removal of SCIP-Inf-4 Cardiac 

Surgery Patients With Controlled 

Postoperative Blood Glucose (NQF 

#0300) 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66876), we 

finalized SCIP-Inf-4 Cardiac Surgery 

Patients with Controlled Postoperative 

Blood Glucose (NQF #0300) for the 

Hospital IQR Program for FY 2009 and 

subsequent years. We also stated that 

hospitals were required to begin 

submitting data for SCIP-Inf-4 beginning 

with January 1, 2008 discharges. 

Since the finalization of SCIP-Inf-4 for 

the Hospital IQR Program, the measure 

underwent routine NQF maintenance 

endorsement proceedings in 2012. 

During the NQF maintenance 

proceedings, the NQF Steering 

Committee discussed and recommended 

that the measure assess a lower blood 

glucose level target and lengthen the 

timeframe for achieving the lower blood 

glucose level target. As part of the 

maintenance endorsement renewal 

process, SCIP-Inf-4 was modified with 

the goal of achieving post-operative 

blood glucose levels of 180 mg/dl at 18– 

24 hours after surgery (previously, the 

timeframe was to achieve 200 mg/dl by 

6 a.m. on post-operative days 1 and 2). 

We finalized the adoption of these 

measure refinements (see revised 

measure specifications at http://www.

qualityforum.org/QPS/0300), in the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50788) with data collection beginning 

with January 1, 2014 discharges. We 

also stated then that we would consider 

whether additional refinements should 

be made to better define the 18–24 hour 

timeframe for the measure. 

Since finalizing the refinements to 

SCIP-Inf-4, we have been contacted by 

stakeholders and experts in the field of 

endocrinology regarding the newly 

refined goal of 180 mg/dl within an 18– 

24 hour timeframe. Specifically, there 

are concerns about the following aspects 

of the measure: (1) Defining ‘‘optimal 

glycemic control;’’ (2) measuring the 

correlation between optimal glycemic 

goals and better outcomes; 83 and (3) 

using an arbitrary 18–24 hour timeframe 

that does not cover a physiologically 

meaningful period of time. 

Experts in the endocrinology field 

have shared that providers’ enthusiasm 

to meet the measure blood glucose goals 

in the specified timeframe may lead to 

the following unintended consequences: 

(1) Providers delaying patients’ meals 

until the 24-hour timeframe has passed; 

(2) providers keeping diabetic patients 

in intensive care units on insulin drips 

until the 24-hour timeframe has passed; 

(3) providers ensuring patients’ 

postprandial glucose levels are kept 

below 180 mg/dl by concurrent use of 

intravenous and subcutaneous insulin 

administration; and (4) undetected 

hypoglycemic events caused by using 

multiple forms of insulin administration 

since the measure does not assess blood 

glucose levels past 24 hours. Multiple 

stakeholders also indicate that the 

Society of Thoracic Surgeons’ 

guidelines 84 on preoperative through 

postoperative cardiac surgery glucose 

control, which helped inform CMS in 

maintenance of this measure, are 

currently being reviewed. Newer 

guidelines will address methods to 

monitor glycemic control in the postcardiac surgical patient population. 

However, these guidelines are not 

currently available to guide further 

refinements of SCIP-Inf-4. 

In view of stakeholder concerns, the 

seriousness of the potential negative 

unintended consequences, and recent 

analysis that shows the refined measure 

is ‘‘topped-out,’’ on January 9, 2015 we 

formally suspended the collection of 

data for SCIP-Inf-4 beginning with July 

1, 2014 discharges. We refer readers to 

https://www.qualitynet.org/dcs/Blob

Server?blobkey=id&blobnocache=true&

blobwhere=1228890406532&

blobheader=multipart%2Foctet-stream&

blobheadername1=ContentDisposition&blobheadervalue1=

attachment%3Bfilename%3D2015-02- 

IP.pdf&blobcol=urldata&blobtable=

MungoBlobs for more information about 

the suspension. 

In this proposed rule, we are 

proposing to remove SCIP-Inf-4 from the 

Hospital IQR Program effective 

beginning with CY 2016 discharges for 

the FY 2018 payment determination and 

subsequent years. We believe removal of 

this measure, rather than continued 

suspension, is appropriate for several 

reasons. First, performance on this 

measure does not result in better patient 

outcomes. Recent literature has 

highlighted that not meeting optimal 

glycemic control for a narrow point in 

time does not result in poorer 

outcomes.85 Second, the measure does 

not align with current clinical 

guidelines or practice.86 As previously 

stated, stakeholders and experts in the 

field of endocrinology have voiced their 

concerns in these areas, especially with 

using an arbitrary 18–24 hour timeframe 

that does not cover a physiologically 

meaningful period of time, as current 

practice guidelines aim for overall 

glycemic control.87 Third, public 

reporting of a measure leads to negative 

unintended consequences other than 

patient harm. As mentioned above, 

these negative unintended 

consequences include potentially 

delaying patient meals or transition 

from the intensive care unit while 

keeping patients on insulin drips. For 

more information on the factors we 

consider for removing or retaining 

quality measures, we refer readers to the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 50203 through 50204) and section 

VIII.A.3.a. of the preamble of this 

proposed rule. The measure will remain 

suspended until CY 2016 discharges 

begin. Despite our proposed removal of 

SCIP-Inf-4, we continue to believe 

glycemic control is important, and we 

hope to include measures focusing on 

glycemic control in the Hospital IQR 

Program in the near future. 

We are inviting public comments on 

our proposal to remove SCIP-Inf-4 from 

the Hospital IQR Program for the FY 

2018 payment determination and 

subsequent years. 

The table below lists the measures we 

are proposing for removal for the FY 

2018 payment determination and 

subsequent years. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24560 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

MEASURES PROPOSED FOR REMOVAL FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

‘‘Topped-out’’ Measures 

• STK–01: Venous Thromboembolism (VTE) Prophylaxis (NQF #0434) 

• STK–06: Discharged on Statin Medication * (NQF #0439) 

• STK–08: Stroke Education * (NQF endorsement removed) 

• VTE–1: Venous Thromboembolism Prophylaxis * (NQF #0371) 

• VTE–2: Intensive Care Unit Venous Thromboembolism Prophylaxis * (NQF #0372) 

• VTE–3: Venous Thromboembolism Patients with Anticoagulation Overlap Therapy * (NQF #0373) 

Other Measures Proposed for Removal 

• IMM–1 Pneumococcal Immunization (NQF #1653) 

• SCIP-Inf-4 Cardiac Surgery Patients with Controlled Postoperative Blood Glucose (NQF #0300) 

• AMI–7a Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival * (NQF #0164) 

* Proposed for retention as electronic clinical quality measures for the Hospital IQR Program FY 2018 payment determination and subsequent 

years. 

We are inviting public comment on 

our proposals. 

4. Previously Adopted Hospital IQR 

Program Measures for the FY 2017 

Payment Determination and Subsequent 

Years 

a. Background 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50246), we described that 

the Hospital IQR Program measure set 

for the FY 2017 payment determination 

and subsequent years includes a total of 

63 measures: 

• 6 NHSN measures 

• 28 electronic clinical quality 

measures (voluntary; 11 of these have 

the option of being reported as chartabstracted measures) 

• 15 chart-abstracted measures (11 of 

these have the option of being 

reported as electronic clinical quality 

measures) 

• 21 claims-based measures 

• 1 survey measure 

• 3 structural measures 

In the FY 2015 IPPS/LTCH PPS final 

rule, we described that of the 63 

measures making up the Hospital IQR 

Program measure set for the FY 2017 

payment determination and subsequent 

years, 42 were previously finalized 

measures, 11 were measures newly 

adopted in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 49865) and 10 were 

measures that were determined to be 

‘‘topped-out’’ but were retained in the 

Hospital IQR Program as voluntary 

electronic clinical quality measures (79 

FR 50208). 

The following table shows measures 

previously adopted for the Hospital IQR 

Program FY 2017 payment 

determination and subsequent years. 

For a detailed list of the Hospital IQR 

Program FY 2018 payment 

determination and subsequent years 

measure set, we refer readers to section 

VIII.A.7.f. of the preamble of this 

proposed rule. 

PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2017 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS

Short name Measure name NQF No. 

NHSN 

CLABSI ...................................... National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection 

(CLABSI) Outcome Measure.

0139 

Colon and Abdominal 

Hysterectomy SSI.

American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure.0753 

CAUTI ........................................ National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) 

Outcome Measure.

0138 

MRSA Bacteremia ..................... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.1716 

CDI ............................................. National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium 

difficile Infection (CDI) Outcome Measure.

1717 

HCP ............................................ Influenza Vaccination Coverage Among Healthcare Personnel ......................................................... 0431 

Chart-abstracted 

AMI–7a * .................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ................................................. 0164 

ED–1 * ........................................ Median Time from ED Arrival to ED Departure for patients Admitted ED Patients ........................... 0495 

ED–2 * ........................................ Admit Decision Time to ED Departure Time for Admitted Patients ................................................... 0497 

Imm-2 ......................................... Influenza Immunization ....................................................................................................................... 1659 

PC–01 * ...................................... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure).0469 

SCIP-Inf-4 .................................. Cardiac Surgery Patients with Controlled Postoperative Blood Glucose ........................................... 0300 

Sepsis ........................................ Severe Sepsis and Septic Shock: Management Bundle (Composite Measure) ................................ 0500 

STK–01 ...................................... Venous Thromboembolism (VTE) Prophylaxis ................................................................................... 0434 

STK–04 * .................................... Thrombolytic Therapy ......................................................................................................................... 0437 

STK–06 * .................................... Discharged on Statin Medication ........................................................................................................ 0439 

STK–08 * .................................... Stroke Education ................................................................................................................................. N/A 

VTE–1 * ...................................... Venous Thromboembolism Prophylaxis ............................................................................................. 0371 

VTE–2 * ...................................... Intensive Care Unit Venous Thromboembolism Prophylaxis ............................................................. 0372 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24561 

PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2017 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS—Continued 

Short name Measure name NQF No. 

VTE–5 * ...................................... Venous Thromboembolism Discharge Instructions ............................................................................ N/A 

VTE–6 * ...................................... Incidence of Potentially Preventable Venous Thromboembolism ...................................................... N/A 

Claims 

MORT–30–AMI .......................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) Hospitalization for Patients 18 and Older.0230 

MORT–30–HF ............................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Heart Failure 

(HF) Hospitalization for Patients 18 and Older.

0229 

MORT–30–PN ............................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Pneumonia Hospitalization.0468 

MORT–30–COPD ...................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization.1893 

STK Mortality ............................. Stroke 30-day Mortality Rate .............................................................................................................. N/A 

CABG Mortality .......................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery 

Bypass Graft (CABG) Surgery.

2558 

READM–30–AMI ........................ Hospital 30-Day All-Cause Risk-Standardized Readmission Rate (RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization.0505 

READM–30–HF ......................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Heart Failure (HF) Hospitalization.0330 

READM–30–PN ......................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneumonia 

Hospitalization.

0506 

READM–30–THA/TKA ............... Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).1551 

READM–30–HWR ...................... Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) ................................................. 1789 

COPD READMIT ....................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization.1891 

STK READMIT ........................... 30-Day Risk Standardized Readmission Rate Following Stroke Hospitalization ............................... N/A 

CABG READMIT ........................ Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following 

Coronary Artery Bypass Graft (CABG) Surgery.

2515 

MSPB ......................................... Payment-Standardized Medicare Spending Per Beneficiary (MSPB) ................................................ 2158 

AMI payment .............................. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Acute 

Myocardial Infarction (AMI).

2431 

HF Payment ............................... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care For Heart 

Failure (HF).

2436 

PN Payment ............................... Hospital-Level, Risk-Standardized Payment Associated with a 30-day Episode-of-Care For Pneumonia.2579 

Hip/knee complications .............. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip 

Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).

1550 

PSI 4 (PSI/NSI) .......................... Death among Surgical Inpatients with Serious, Treatable Complications ......................................... 0351 

PSI 90 ........................................ Patient Safety for Selected Indicators (Composite Measure) ............................................................ 0531 

Electronic Clinical Quality Measures 

AMI–2 ......................................... Aspirin Prescribed at Discharge for AMI ............................................................................................ 0142 

AMI–7a * ..................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ................................................. 0164 

AMI–8a ....................................... Primary PCI Received Within 90 Minutes of Hospital Arrival ............................................................. 0163 

AMI–10 ....................................... Statin Prescribed at Discharge ........................................................................................................... N/A 

CAC–3 ........................................ Home Management Plan of Care Document Given to Patient/Caregiver .......................................... N/A 

EHDI–1a ..................................... Hearing Screening Prior to Hospital Discharge .................................................................................. 1354 

ED–1 * ........................................ Median Time from ED Arrival to ED Departure for Admitted ED Patients ......................................... 0495 

ED–2 * ........................................ Admit Decision Time to ED Departure Time for Admitted Patients ................................................... 0497 

HTN ............................................ Healthy Term Newborn ....................................................................................................................... 0716 

PC–01 * ...................................... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure).0469 

PC–05 ........................................ Exclusive Breast Milk Feeding and the Subset Measure PC–05a Exclusive Breast Milk Feeding 

Considering Mother ́s Choice.

0480 

PN–6 .......................................... Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patients.0147 

SCIP-Inf-1a ................................ Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision .................................... 0527 

SCIP-Inf-2a ................................ Prophylactic Antibiotic Selection for Surgical Patients ....................................................................... 0528 

SCIP-Inf-9 .................................. Urinary Catheter Removed on Postoperative Day 1 (POD 1) or Postoperative Day 2 (POD 2) with 

Day of Surgery Being Day Zero.

N/A 

STK–02 ...................................... Discharged on Antithrombotic Therapy .............................................................................................. 0435 

STK–03 ...................................... Anticoagulation Therapy for Atrial Fibrillation/Flutter .......................................................................... 0436 

STK–04 * .................................... Thrombolytic Therapy ......................................................................................................................... 0437 

STK–05 ...................................... Antithrombotic Therapy by the End of Hospital Day Two .................................................................. 0438 

STK–06 * .................................... Discharged on Statin Medication ........................................................................................................ 0439 

STK–08 * .................................... Stroke Education ................................................................................................................................. N/A 

STK–10 ...................................... Assessed for Rehabilitation ................................................................................................................ 0441 

VTE–1 * ...................................... Venous Thromboembolism Prophylaxis ............................................................................................. 0371 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24562 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

88National Quality Forum ‘‘Process and 

Approach for MAP Pre-Rulemaking Deliberations 

2015’’ found at: http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx and 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ available at: http://www.quality

forum.org/map/. 

PREVIOUSLY ADOPTED HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2017 PAYMENT DETERMINATION AND

SUBSEQUENT YEARS—Continued 

Short name Measure name NQF No. 

VTE–2 * ...................................... Intensive Care Unit Venous Thromboembolism Prophylaxis ............................................................. 0372 

VTE–3 ........................................ Venous Thromboembolism Patients with Anticoagulation Overlap Therapy ..................................... 0373 

VTE–4 ........................................ Venous Thromboembolism Patients Receiving Unfractionated Heparin with Dosages/Platelet 

Count Monitoring by Protocol or Nomogram.

N/A 

VTE–5 * ...................................... Venous Thromboembolism Discharge Instructions ............................................................................ N/A 

VTE–6 * ...................................... Incidence of Potentially Preventable Venous Thromboembolism ...................................................... N/A 

Patient Survey 

HCAHPS .................................... HCAHPS + 3-Item Care Transition Measure (CTM–3) ...................................................................... 0166 

0228 

Structural 

Registry for Nursing Sensitive 

Care.

Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care ....................... N/A 

Registry for General Surgery ..... Participation in a Systematic Clinical Database Registry for General Surgery .................................. N/A 

Safe Surgery Checklist .............. Safe Surgery Checklist Use ................................................................................................................ N/A 

* Measure is listed twice, as both chart-abstracted and electronic clinical quality measure. 

b. NHSN Measures Standard Population 

Data 

The previously adopted NHSN 

measures include the CAUTI, CLABSI, 

MRSA Bacteremia, CDI, colon and 

abdominal hysterectomy SSI measures, 

and HCP for the FY 2017 payment 

determination and subsequent years. We 

refer readers to the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50200 through 

50202) and the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51616 through 51618; 

76 FR 51629 through 51633) for more 

information about these measures. 

These NHSN measures measure the 

incidence of HAIs in hospitals 

participating in the Hospital IQR 

Program. In order to calculate the NHSN 

measures for use in the Hospital IQR 

Program, CDC must go through several 

steps. 

First, CDC determines each NHSN 

measure’s number of predicted 

infections. CDC determines this number 

using both specific hospital 

characteristics (for example, number of 

central line days for CLABSI) and 

infection rates that occurred among a 

standard population (sometimes 

referred to by CDC as ‘‘national 

baseline’’ but referred to here as 

‘‘standard population data’’). CDC 

currently uses data it collected in 

calendar year (CY) 2009 for the CAUTI 

measure’s standard population data. 

In addition, for each NHSN measure, 

CDC calculates the Standardized 

Infection Ratio (SIR) by comparing a 

hospital’s reported number of HAIs with 

the standard population data. For more 

information about the way NHSN 

measures are calculated, please refer to 

the QualityNet Web page on HAI 

measures at: https://www.qualitynet.org/ 

dcs/ContentServer?c=Page&pagename=

QnetPublic%2FPage%2FQnetTier2&

cid=1228760487021. 

We would like to notify the public 

that CDC will update the standard 

population data to ensure the NHSN 

measures’ number of predicted 

infections reflect the current state of 

HAIs in the United States. The standard 

referent population that CDC uses to 

calculate the Standardized Infection 

Ratios (SIRs) is comprised of healthcareassociated infection data that CDC’s 

NHSN collects from healthcare facilities 

throughout the United States for 

infection events that occurred in a 

specified baseline time period. 

Beginning in CY 2016, CDC will use 

data collected for infection events that 

occurred in 2015 as the new standard 

referent population. To do so, CDC will 

collect HAI data that healthcare 

facilities are reporting for events that 

have or will occur in CY 2015 to use in 

updating the standard population data 

for HAI measures. This new CY 2015 

standard population data for HAI 

measures will hereinafter be referred to 

as ‘‘new standard population data.’’ 

While this is not a Hospital IQR 

Program proposal, we are still inviting 

public input on the CDC’s plans to 

update the standard population data for 

HAI measures. 

5. Expansion and Updating of Quality 

Measures 

We refer readers to the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53510 

through 53512) for a discussion of the 

considerations we use to expand and 

update quality measures under the 

Hospital IQR Program. We are not 

proposing any changes to these 

considerations. 

6. Proposed Refinements to Existing 

Measures in the Hospital IQR Program 

We are proposing refinements to the 

measure cohorts for: (1) The Hospital 

30-day, All-cause, Risk-Standardized 

Mortality Rate (RSMR) following 

Pneumonia Hospitalization (NQF 

#0468) measure; and (2) the Hospital 30- 

day, All-cause, Risk-Standardized 

Readmission Rate following Pneumonia 

Hospitalization (NQF #0506) measure. 

The proposed refined measures were 

included on a publicly available 

document entitled ‘‘List of Measures 

Under Consideration for December 1, 

2014’’ in compliance with section 

1890A(a)(2) of the Act, and they were 

reviewed by the MAP as discussed in its 

MAP Pre-Rulemaking Report.88 These 

measure refinements are discussed in 

greater detail below. 

a. Proposed Refinement of Hospital 30- 

Day, All-Cause, Risk-Standardized 

Mortality Rate (RSMR) Following 

Pneumonia Hospitalization (NQF 

#0468) Measure Cohort 

(1) Background 

We are proposing a refinement to the 

previously adopted Hospital 30-Day, 

All-Cause, Risk-Standardized Mortality 

Rate (RSMR) Following Pneumonia 

Hospitalization (NQF #0468) measure 

(hereinafter referred to as the CMS 30- 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24563 

89Lindenauer PK, Lagu T, Shieh MS, Pekow PS, 

Rothberg MB. Association of diagnostic coding with 

trends in hospitalizations and mortality of patients 

with pneumonia, 2003–2009. Journal of the 

American Medical Association. Apr 4 

2012;307(13):1405–1413. 

90Rothberg MB, Pekow PS, Priya A, Lindenauer 

PK. Variation in diagnostic coding of patients with 

pneumonia and its association with hospital riskstandardized mortality rates: A cross-sectional 

analysis. Annals of Internal Medicine. Mar 18 

2014;160(6):380–388. 

91Rothberg MB, Pekow PS, Priya A, Lindenauer 

PK. Variation in diagnostic coding of patients with 

pneumonia and its association with hospital riskstandardized mortality rates: A cross-sectional 

analysis. Annals of Internal Medicine. Mar 18 

2014;160(6):380–388. 

day Pneumonia Mortality Measure), 

which expands the measure cohort. For 

the purposes of describing the 

refinement of this measure, we note that 

‘‘cohort’’ is defined as the 

hospitalizations, or ‘‘index admissions,’’ 

that are included in the measure and 

evaluated to ascertain whether the 

patient subsequently died within 30 

days of the index admission. This 

cohort is the set of hospitalizations that 

meet all of the inclusion and exclusion 

criteria, and we are proposing an 

expansion to this set of hospitalizations. 

The previously adopted CMS 30-day 

Pneumonia Mortality Measure (72 FR 

47351) includes hospitalizations for 

patients with a principal discharge 

diagnosis of pneumonia indicating viral 

or bacterial pneumonia. For more cohort 

details on the measure as currently 

implemented, we refer readers to the 

measure methodology report and 

measure risk adjustment statistical 

model in the AMI, HF, PN, COPD, and 

Stroke Mortality Update zip file on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital

QualityInits/MeasureMethodology.html. 

The proposed measure refinement 

would expand the measure cohort to 

include hospitalizations for patients 

with a principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

either sepsis or respiratory failure who 

also have a secondary diagnosis of 

pneumonia present on admission. We 

anticipate that this refined measure will 

first be publicly reported on Hospital 

Compare with the proposed cohort 

change in CY 2016. 

This refinement to the CMS 30-Day 

Pneumonia Mortality Measure is being 

proposed for several reasons. First, 

recent evidence has shown an increase 

in the use of sepsis and respiratory 

failure as principal diagnosis codes 

among patients hospitalized with 

pneumonia.89 Pneumonia patients with 

these principle diagnosis codes are not 

currently included in the measure 

cohort, and including them would better 

capture the complete patient population 

of a hospital with patients receiving 

clinical management and treatment for 

pneumonia. 

Second, because patients with a 

principal diagnosis of sepsis and 

respiratory failure are not included in 

the current CMS 30-Day Pneumonia 

Mortality Measure specifications, efforts 

to evaluate changes over time in 

pneumonia outcomes could be biased as 

coding practices change. 

Finally, another published study 90

has also demonstrated wide variation in 

the use of sepsis and respiratory failure 

codes as principal discharge diagnoses 

for pneumonia patients across hospitals, 

potentially biasing efforts to compare 

hospital performance on 30-day 

mortality. These published studies and 

CMS analyses show that hospitals that 

use sepsis and respiratory failure codes 

for the principal diagnosis frequently 

have better performance on the CMS 30- 

Day Pneumonia Mortality Measure. This 

coding practice improves performance 

on the measure because patients with 

greatest severity of illness (for example, 

those with sepsis or respiratory failure) 

are systematically excluded from the 

measure under current measure 

specifications, leaving only patients 

with less severity of illness in the 

cohort. 

In response to these emerging data, 

we examined coding patterns across 

hospitals caring for Medicare patients 

and sought to forecast the impact of 

enhancing or broadening the measure 

cohort to include the complete patient 

population, at each hospital, who are 

receiving clinical management and 

treatment for pneumonia. Our findings 

were consistent with a published 

study.91 That is, our results suggested 

that there is: (1) An increasing use of 

respiratory failure and sepsis as 

principal discharge diagnoses for 

pneumonia patients, and (2) wide 

variation across hospitals in the use of 

these codes. 

In addition to assessing the use of the 

principal diagnosis codes of sepsis and 

respiratory failure, we also analyzed 

coding patterns and the impact of 

expanding the pneumonia measure to 

include patients with the principal 

diagnosis of aspiration pneumonia. We 

noted after our analyses that aspiration 

pneumonia: (1) Is a common reason for 

pneumonia hospitalization, particularly 

among the elderly; (2) is currently not 

included in the CMS hospital outcome 

measure specifications for pneumonia 

patients; and (3) appears to be similarly 

subject to variation in diagnosis, 

documentation, and coding. These 

findings suggest that a measure with an 

enhanced or broader cohort for the 

current CMS 30-Day Pneumonia 

Mortality Measure will ensure that the 

measure includes more complete and 

comparable populations across 

hospitals. Use of comparable 

populations would reduce measurement 

bias resulting from different coding 

practices across hospitals. We believe 

that measure results derived from 

refinement of the measure cohort in the 

manner we are proposing, which will 

include additional pneumonia patients 

that are not being included under the 

current measure specifications, will 

improve the fidelity of the measure’s 

assessment of quality and outcome for 

pneumonia. 

The proposed 30-Day Pneumonia 

Mortality Measure with this expanded 

measure cohort was included on a 

publicly available document entitled 

‘‘List of Measures Under Consideration 

for December 1, 2014’’ with 

identification number E0468 and has 

been reviewed by the MAP. The revised 

measure was conditionally supported 

pending NQF endorsement of the 

measure update, as detailed in the 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ available at: http:// 

www.qualityforum.org/map/. This 

refined pneumonia mortality measure 

will be submitted to NQF for reendorsement when the appropriate 

measure endorsement project has a call 

for measures this year. We will work to 

minimize potential confusion when 

publicly reporting the updated measure. 

(2) Overview of Measure Cohort Change 

The proposed measure refinement 

would expand the cohort to include 

hospitalizations for patients with a 

principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

sepsis or respiratory failure who also 

have a secondary diagnosis of 

pneumonia that is coded as present on 

admission. The data sources, exclusion 

criteria, assessment of the outcome of 

mortality, and 3 year data evaluation 

period all remain unchanged. 

(3) Risk Adjustment 

The statistical modeling approach as 

well as the measure calculation remain 

unchanged from the previously adopted 

measure. The risk adjustment approach 

also remains unchanged; however, we 

included additional risk variables to 

account for the discharge diagnoses 

added as part of the expanded cohort. 

For the full measure specifications of 

the proposed change to the measure, we 

refer readers to the AMI, HF, PN, COPD, 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24564 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

92Rothberg MB, Pekow PS, Priya A, Lindenauer 

PK.: Variation in diagnostic coding of patients with 

pneumonia and its association with hospital riskstandardized mortality rates: A cross-sectional 

analysis. Annals of Internal Medicine. Mar 18 

2014;160(6):380–388. 

and Stroke Readmission Update zip file 

on our Web site at: http://www.cms.gov/ 

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. 

(4) Effect of Refinement of Hospital 30- 

Day, All-Cause, Risk-Standardized 

Mortality Rate (RSMR) Following 

Pneumonia Hospitalization Measure 

Cohort 

Using administrative claims data for 

FY 2015 (that is, discharges between 

July 2010–June 2013), we analyzed and 

simulated the effect of the proposed 

cohort refinements on the CMS 30-day 

Pneumonia Mortality Measure as if 

these changes had been applied for FY 

2015. We note that these statistics are 

for illustrative purposes only, and we 

are not proposing to revise the measure 

calculations for the FY 2015 payment 

determination. 

Expanding the measure cohort to 

include a broader population of patients 

adds a large number of patients, as well 

as additional hospitals (which would 

now meet the minimum threshold of 25 

cases), to the CMS 30-day Pneumonia 

Mortality Measure. In the FY 2010 IPPS/ 

LTCH PPS final rule (74 FR 43881), we 

established that if a hospital has fewer 

than 25 eligible cases combined over a 

measure’s reporting period, we would 

replace the hospital’s data with a 

footnote indicating that the number of 

cases is too small to reliably determine 

how well the hospital is performing. 

These cases are still used to calculate 

the measure; however, for hospitals 

with fewer than 25 eligible cases, the 

hospital’s mortality rates and interval 

estimates are not publicly reported for 

the measure. For more information 

about this minimum case threshold for 

public reporting, we refer readers to 

section VIII.A.13. of the preamble of this 

proposed rule. The increase in the size 

of the measure cohort proposed in this 

rule would change results for many 

hospitals and would change the number 

of hospitals that have greater than 25 

cases. 

The previously adopted pneumonia 

mortality measure cohort includes 

976,590 patients and 4,418 hospitals for 

the FY 2015 payment determination. We 

noted the following effects for the CMS 

30-Day Pneumonia Mortality Measure if 

the expanded cohort had been applied 

for FY 2015: (1) The expansion of the 

cohort would include an additional 

686,605 patients (creating a total 

measure cohort size of 1,663,195 

patients); (2) an additional 86 hospitals 

would meet the minimum 25 patient 

cases volume threshold over the 3-year 

measure period and would be publicly 

reported for the measure; (3) 41 percent 

of the refined measure cohort would 

consist of patients with a principal 

discharge diagnosis of aspiration 

pneumonia and patients with a 

principal discharge diagnosis of sepsis 

or respiratory failure who also have a 

secondary diagnosis of pneumonia 

present on admission; and (4) there 

would be an increase in the number of 

hospitals considered outliers and a shift 

in some hospitals’ outlier status 

classification, for example from ‘‘better 

than the national rate’’ to ‘‘no different 

than the national rate’’ or from ‘‘worse 

than the national rate’’ to ‘‘no different 

than the national rate.’’ 

A detailed description of the 

refinements to the CMS 30-Day 

Pneumonia Mortality Measure and the 

effects of the change are available in the 

AMI, HF, PN, COPD, and Stroke 

Readmission Update zip file on our Web 

site at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. We note 

that this file contains information for 

both Mortality and Readmission. 

We are inviting public comment on 

our proposal to refine the previously 

adopted Hospital 30-Day, All-Cause, 

Risk-Standardized Mortality Rate 

(RSMR) Following Pneumonia 

Hospitalization (NQF #0468) measure, 

expanding the measure cohort. 

b. Proposed Refinement of Hospital 30- 

Day, All-Cause, Risk-Standardized 

Readmission Rate (RSRR) Following 

Pneumonia Hospitalization (NQF 

#0506) Measure Cohort 

(1) Background 

In this proposed rule, we are 

proposing a refinement of the 

previously adopted measure, Hospital 

30-day all-cause, risk-standardized 

readmission rate following pneumonia 

hospitalization (NQF #0506) (hereinafter 

referred to as the CMS 30-Day 

Pneumonia Readmission Measure) 

which expands the measure cohort. For 

the purposes of describing the 

refinement of this measure, we note that 

‘‘cohort’’ is defined as the 

hospitalizations, or ‘‘index admissions,’’ 

that are included in the measure and 

evaluated to ascertain whether the 

patient was subsequently readmitted to 

the hospital within 30 days of the index 

admission. This cohort is the set of 

hospitalizations that meets all of the 

inclusion and exclusion criteria and we 

are proposing an expansion to this set 

of hospitalizations. 

The previously adopted CMS 30-Day 

Pneumonia Readmission Measure, as 

specified in the FY 2009 IPPS PPS 

proposed rule (73 FR 23648) and 

adopted in the CY 2009 OPPS/ASC final 

rule with comment period (73 FR 68780 

through 68781), includes 

hospitalizations for patients with a 

principal discharge diagnosis of 

pneumonia indicating viral or bacterial 

pneumonia. For measure cohort details 

of the currently implemented measure, 

we refer readers to the measure 

methodology report and measure risk 

adjustment statistical model in the AMI, 

HF, PN, COPD, and Stroke 

Readmissions Update zip file on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. 

This proposed measure refinement 

would expand the measure cohort to 

include hospitalizations for patients 

with a principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

either sepsis or respiratory failure who 

also have a secondary diagnosis of 

pneumonia present on admission. The 

determination to refine the measure 

cohort was based on our evaluation of 

both the frequency and variation in 

utilization of these diagnosis codes, as 

such coding practices have been 

described in recently published studies. 

We anticipate that this measure will 

first be publicly reported with the 

proposed cohort change in CY 2016. 

This refinement to the CMS 30-Day 

Pneumonia Readmission Measure is 

being proposed in response to recent 

evidence showing increasing use of the 

principal diagnosis codes of sepsis and 

respiratory failure among patients 

hospitalized with pneumonia. Including 

such patients will better represent the 

complete population of a hospital’s 

patients who are receiving clinical 

management and treatment for 

pneumonia. In addition, because 

patients with a principal diagnosis of 

sepsis and respiratory failure are not 

included in the current CMS 30-Day 

Pneumonia Readmission Measure 

specifications, efforts to evaluate 

changes over time in pneumonia 

outcomes could be biased as coding 

practices change. 

Wide variation exists in the use of 

sepsis and respiratory failure codes 

across hospitals, potentially biasing 

efforts to compare hospital performance 

on 30-day readmission rates.92 While 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24565 

93Rothberg MB, Pekow PS, Priya A, Lindenauer 

PK.: Variation in diagnostic coding of patients with 

pneumonia and its association with hospital riskstandardized mortality rates: A cross-sectional 

analysis. Annals of Internal Medicine. Mar 18 

2014;160(6):380–388. 

94Rothberg MB, Pekow PS, Priya A, Lindenauer 

PK.: Variation in diagnostic coding of patients with 

pneumonia and its association with hospital riskstandardized mortality rates: A cross-sectional 

analysis. Annals of Internal Medicine. Mar 18 

2014;160(6):380–388. 

the referenced study 93 evaluated the 

effect of coding practices on mortality 

measure performance, the rationale is 

applicable to readmission measure 

performance as well. The increased use 

of sepsis and respiratory failure 

diagnosis codes improves performance 

because the patients with greatest 

severity of illness (for example, those 

with sepsis or respiratory failure) are 

currently systematically excluded from 

the measure, leaving only patients with 

lesser severity of illness in the measure 

cohort. 

In response to this emerging data, we 

examined coding patterns across 

hospitals caring for Medicare patients 

and sought to forecast the impact of 

broadening the measure cohort to 

include the complete population of 

patients at each hospital who are 

receiving clinical management and 

treatment for pneumonia. Our findings 

were consistent with a published 

study 94 for mortality; that is, our results 

suggested that there is an increasing use 

of respiratory failure and sepsis as 

principal discharge diagnoses for 

pneumonia patients, as well as showed 

wide variation across hospitals in the 

use of these codes. In addition to 

assessing the use of the principal 

diagnosis codes of sepsis and 

respiratory failure, we also analyzed 

coding patterns and the impact of 

expanding the pneumonia measure to 

include patients with the principal 

diagnosis of aspiration pneumonia. We 

noted after our analyses that aspiration 

pneumonia: (1) Is a common reason for 

pneumonia hospitalization, particularly 

among the elderly; (2) is currently not 

included in the CMS hospital outcome 

measure specifications for pneumonia 

patients; and (3) appears to be similarly 

subject to variation in diagnosis, 

documentation, and coding. These 

findings suggest that expanding the 

measure cohort for the current CMS 30- 

Day Pneumonia Readmission Measure 

will ensure the measure includes more 

complete and comparable populations 

across hospitals. Use of comparable 

populations would reduce measurement 

bias resulting from different coding 

practices seen across hospitals. We 

believe that measure results derived 

from refinement of the measure cohort 

in the manner we are proposing, which 

will include additional pneumonia 

patients that are not being included 

under the current measure 

specifications, will improve the fidelity 

of the measure’s assessment of quality 

and outcome for pneumonia. 

The proposed refined measure was 

included on a publicly available 

document entitled ‘‘List of Measures 

Under Consideration for December 1, 

2014’’ with identification number 

E0506, has been reviewed by the MAP, 

and was conditionally supported 

pending NQF review of the measure 

update. In particular, MAP members 

noted that the measure should be 

considered for socio-demographic status 

(SDS) adjustment in the upcoming NQF 

trial period, reviewed for the empirical 

and conceptual relationship between 

SDS factors and risk-standardized 

readmission rates, and endorsed with 

appropriate consideration of SDS factors 

as determined by NQF standing 

committees. We refer readers to the 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ available at: http:// 

www.qualityforum.org/map/ for more 

information. When the appropriate 

measure endorsement project has a call 

for measures in 2015, this measure will 

be submitted to the NQF for 

reendorsement with special 

consideration of the potential impact of 

SDS adjustment on the measure. 

(2) Overview of Measure Cohort Change 

The proposed measure refinement 

would expand the measure cohort to 

include hospitalizations for patients 

with a principal discharge diagnosis of 

aspiration pneumonia and for patients 

with a principal discharge diagnosis of 

sepsis or respiratory failure who also 

have a secondary diagnosis of 

pneumonia that is coded as present on 

admission. The data sources, exclusion 

criteria, assessment of the outcome of 

readmission, and previous 3 years data 

evaluation period remain unchanged. 

(3) Risk Adjustment 

The statistical modeling approach as 

well as the measure calculation remain 

unchanged from the previously adopted 

measure. The risk adjustment approach 

also remains unchanged; however, we 

included additional risk variables to 

account for the discharge diagnoses 

added as part of the expanded cohort. 

For the full measure specifications of 

the proposed changes to the measure, 

we refer readers to the AMI, HF, PN, 

COPD, and Stroke Readmissions Update 

zip file on our Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

(4) Effect of Refinement of Hospital 30- 

Day, All-Cause, Risk-Standardized 

Readmission Rate (RSRR) Following 

Pneumonia Hospitalization Measure 

Cohort 

Using administrative claims data for 

FY 2015 (that is, discharges between 

July 2010–June 2013); we analyzed and 

simulated the effect of the proposed 

measure cohort refinements on the CMS 

30-Day Pneumonia Readmission 

Measure as if these changes had been 

applied for FY 2015. We note that these 

statistics are for illustrative purposes 

only, and we are not proposing to revise 

the measure calculations for the FY 

2015 payment determination. We 

anticipate that this measure will first be 

publicly reported with the proposed 

cohort change in CY 2016. 

Based on our analysis, we anticipate 

that expanding the measure cohort to 

include a broader population of patients 

would add a large number of patients, 

as well as additional hospitals (which 

would now meet the minimum 

threshold of 25 cases), to the CMS 30- 

Day Pneumonia Readmission Measure. 

In the FY 2010 IPPS/LTCH PPS final 

rule (74 FR 43881), CMS established 

that if a hospital has fewer than 25 

eligible cases combined over a 

measure’s reporting period, we would 

replace the hospital’s data with a 

footnote indicating that the number of 

cases is too small to reliably tell how 

well the hospital is performing. These 

cases are still used to calculate the 

measure; however, for hospitals with 

fewer than 25 eligible cases, the 

hospital’s readmission rates and interval 

estimates are not publicly reported for 

the measure. For more information 

about this minimum case threshold for 

public reporting, we refer readers to 

section VIII.A.13. of the preamble of this 

proposed rule. The increase in the size 

of the measure cohort proposed in this 

measure cohort would change results for 

many hospitals and would change the 

number of hospitals that have greater 

than 25 cases. 

The previously adopted pneumonia 

readmission measure cohort includes 

1,094,959 patients and 4,451 hospitals 

for FY 2015 payment determination. We 

noted the following effects for the CMS 

30-Day Pneumonia Readmission 

Measure if the expanded cohort had 

been applied for FY 2015: (1) The 

expansion of the CMS 30-Day 

Pneumonia Readmission Measure 

cohort would include an additional 

670,491 patients (creating a total 

measure cohort of 1,765,450 patients); 

(2) there would be an additional 67 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24566 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

95Measure Applications Partnership: List of 

Measures Under Consideration (MUC) for December 

1, 2014. Retrieved from http://www.qualityforum.

org/WorkArea/linkit.aspx?LinkIdentifier=id&Item

ID=78318. 

96National Quality Forum ‘‘Process and 

Approach for MAP Pre-Rulemaking Deliberations 

2015’’ found at: http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx and 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ available at: http://www.quality

forum.org/map/. 

97Nieva VF, Sorra J.: Safety culture assessment: 

a tool for improving patient safety in healthcare 

organizations. Qual Saf Health Care 2003; 12:ii17– 

23. 

98Frequently Asked Questions: Surveys on 

Patient Safety Culture. October 2014. Agency for 

Healthcare Research and Quality, Rockville, MD. 

Available at: http://www.ahrq.gov/professionals/

quality-patient-safety/patientsafetyculture/

pscfaq.html. 

99Survey. (n.d.). Available at: http://www.pascal

metrics.com/solutions/survey/. 

100Hospital Survey on Patient Safety Culture. 

(n.d.). Available at: http://www.ahrq.gov/

professionals/quality-patient-safety/patientsafety

culture/hospital/index.html. 

101Measurement Instrument Database for the 

Social Sciences. (n.d.). Available at: http://www.

midss.org/content/patient-safety-climatehealthcare-organizations-pscho. 

102 Dianne, P. (n.d.). Manchester Patient Safety 

Framework (MaPSaF). National Patient Safety 

Agency. Available at: http://www.nrls.npsa.nhs.uk/ 

resources/?entryid45=59796. 

103Hospital Survey on Patient Safety Culture: 

2014 User Comparative Database Report: Executive 

Summary. March 2014. Agency for Healthcare 

Research and Quality, Rockville, MD. Available at: 

http://www.ahrq.gov/professionals/quality-patientsafety/patientsafetyculture/hospital/2014/

hosp14summ.html. 

104Hospital Survey on Patient Safety Culture: 

2014 User Comparative Database Report: Executive 

hospitals that meet the minimum 25 

patient cases volume threshold over the 

3-year applicable period and would be 

publicly reported for the measure; (3) 

patients with a principal discharge 

diagnosis of aspiration pneumonia and 

patients with a principal discharge 

diagnosis of sepsis or respiratory failure 

who also have a secondary diagnosis of 

pneumonia present on admission would 

represent 38 percent of the total 

expanded measure cohort; and (4) there 

would be an increase in the number of 

hospitals considered outliers and a shift 

in some hospitals’ outlier status 

classification, for example from ‘‘better 

than the national rate’’ to ‘‘no different 

than the national rate’’ or from ‘‘worse 

than the national rate’’ to ‘‘no different 

than the national rate.’’ 

A detailed description of the 

refinements to the CMS 30-Day 

Pneumonia Readmission Measure and 

the effects of the change are available in 

the AMI, HF, PN, COPD, and Stroke 

Readmission Updates zip file on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. 

We are inviting public comment on 

our proposal to refine the previously 

adopted Hospital 30-day, All-Cause, 

Risk-Standardized Readmission Rate 

(RSRR) following Pneumonia 

Hospitalization (NQF #0506) measure, 

which expands the measure cohort. 

7. Proposed Additional Hospital IQR 

Program Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

We are proposing to add eight new 

measures to the Hospital IQR Program 

for the FY 2018 payment determination 

and subsequent years. We are proposing 

to adopt seven new claims-based 

measures and one new structural 

measure: (1) Hospital Survey on Patient 

Safety Culture (structural); (2) Kidney/

UTI Clinical Episode-Based Payment 

Measure (claims-based); (3) Cellulitis 

Clinical Episode-Based Payment 

Measure (claims-based); (4) 

Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment Measure 

(claims-based); (5) Lumbar Spine 

Fusion/Re-Fusion Clinical EpisodeBased Payment Measure (claims-based); 

(6) Hospital-Level, Risk-Standardized 

Payment Associated with an Episode-ofCare for Primary Elective THA/TKA 

(claims-based); (7) Excess Days in Acute 

Care after Hospitalization for Acute 

Myocardial Infarction (claims-based); 

and (8) Excess Days in Acute Care after 

Hospitalization for Heart Failure 

(claims-based). 

The proposed measures were 

included on a publicly available 

document entitled ‘‘List of Measures 

Under Consideration for December 1, 

2014’’ 95 in compliance with section 

1890A(a)(2) of the Act, and they were 

reviewed by the MAP as discussed in its 

MAP Pre-Rulemaking Report and 

Spreadsheet of MAP 2015 Final 

Recommendations.96

For purposes of the Hospital IQR 

Program, section 1886(b)(3)(B)(IX)(aa) of 

the Act requires that any measure 

specified by the Secretary must have 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act. The NQF currently holds this 

contract. However, section 

1886(b)(3)(B)(IX)(bb) of the Act provides 

an exception that, in the case of a 

specified area or medical topic 

determined appropriate by the Secretary 

for which a feasible and practical 

measure has not been endorsed by the 

entity with a contract under section 

1890(a) of the Act, the Secretary may 

specify a measure that is not so 

endorsed as long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

a. Hospital Survey on Patient Safety 

Culture 

(1) Background 

For the FY 2018 payment 

determination and subsequent years, we 

are proposing to adopt the Hospital 

Survey on Patient Safety Culture. This 

proposed structural measure assesses 

whether a hospital administers a patient 

safety culture survey. Improving the 

safety of patient care is a priority and a 

quality improvement goal for CMS. We 

believe this structural measure will 

allow us to gain an understanding of 

whether hospitals are using a survey of 

patient safety culture in their hospitals. 

Because the number of questions in this 

measure is limited to five and can be 

completed using a Web-based tool, we 

believe this structural measure will not 

add undue reporting burden to 

hospitals. 

We note that patient safety culture 

surveys are useful tools for measuring 

organizational conditions that can lead 

to adverse events and other incidences 

that can cause harm to patients in health 

care organizations.97 Patient safety 

culture surveys can be used to: (1) Raise 

staff awareness about patient safety; (2) 

assess the current status of patient safety 

culture; (3) identify strengths and areas 

for improvement; and (4) examine 

trends in patient safety culture over 

time.98

There are multiple surveys that are 

currently used by the healthcare 

industry to assess patient safety culture 

including: the Pascal Metrics’ Safety 

Attitudes Questionnaire (SAQ),99 the 

Agency for Healthcare Research and 

Quality (AHRQ) Hospital Survey on 

Patient Safety Culture (HSOPSC),100 the 

Patient Safety Climate in Healthcare 

Organizations (PSCHO),101 and the 

Manchester Patient Safety 

Framework.102 However, it is not clear 

which patient safety culture survey is 

used most frequently, or how many 

hospitals consistently assess their 

performance on these surveys. One 

example of use of a patient safety 

culture survey is the HSOPSC, which is 

nonproprietary and available to 

hospitals at no cost. AHRQ developed 

the survey, with CMS input, released it 

in 2004, and subsequently displayed 

results from 653 hospitals in 2014.103

Use of the HSOPSC, as well as reporting 

results to AHRQ, was and continues to 

be voluntary. Among the reporting 

hospitals, there was variation in 

frequency of survey use, format of 

administration (Web versus paper) and 

staff sampling scheme.104


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Summary. March 2014. Agency for Healthcare 

Research and Quality, Rockville, MD. Available at: 

http://www.ahrq.gov/professionals/quality-patientsafety/patientsafetyculture/hospital/2014/

hosp14summ.html. 

105National Quality Forum Measure Application 

Partnership. ‘‘Spreadsheet of MAP 2015 Final 

Recommendations.’’ Available at: http://www.

qualityforum.org/map/. 

106For example: Hussey, P. S., Sorbero, M. E., 

Mehrotra, A., Liu, H., & Damberg, S. L.: (2009). 

Episode-Based Performance Measurement and 

Payment: Making It a Reality. Health Affairs, 28(5), 

1406–1417. doi:10.1377/hlthaff.28.5.1406. 

107National Quality Forum. The report is 

available at: http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx and 

the ‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ is available at: http://

www.qualityforum.org/map/. 

108 Detailed measure specifications can be found 

in the ‘‘Medicare Spending Per Beneficiary (MSPB) 

Measure Overview,’’ available at: http://

www.qualitynet.org/dcs/ContentServer?c=Page

&pagename=QnetPublic%2FPage%2FQnetTier

3&cid=1228772053996. 

Through the proposed Hospital 

Survey on Patient Safety Culture 

Measure, we will begin to understand 

how hospitals are using surveys, like the 

examples cited above, in improving 

their patient safety culture. This 

proposed measure will allow CMS to 

collect data on whether a hospital 

conducts a patient safety culture survey, 

and if so, which tool they use, how 

frequently the tool is administered, and 

the response rate. This structural 

measure will help inform CMS of 

whether a measure targeting the culture 

of patient safety using a specific survey 

is feasible. 

Finally, we note that the MAP 

supports this measure and specifically 

highlighted that a patient safety culture 

survey is an important tool for hospitals 

to use to build a system of quality 

improvement within health care 

facilities.105 While this measure is not 

currently NQF-endorsed, we are 

proposing this measure in the Hospital 

IQR Program under the exception 

authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to patient safety that have been 

endorsed by the NQF and we were 

unable to identify any NQF-endorsed 

measures that assess a patient safety 

culture, and found no other feasible and 

practical measures on this topic. We 

also are not aware of any other measures 

that assess whether a hospital 

administers a survey on patient safety. 

(2) Overview of Measure 

Reporting on a patient safety culture 

survey involves providing answers to 

the following questions listed below. 

Hospitals would submit answers via a 

Web-based tool on the QualityNet Web 

site: 

(A) Does your facility administer a 

detailed assessment of patient safety 

culture using a standardized collection 

protocol and structured instrument? 

(B) What is the name of the survey 

that is administered? 

(C) How frequently is the survey 

administered? 

(D) Does your facility report survey 

results to a centralized location? 

(Optional response options include the 

following: National data repository; 

State-based data repository; health 

system repository; other; and do not 

report the data outside the facility.) 

(E) During the most recent 

assessment: 

(a) How many staff members were 

requested to complete the survey? 

(b) How many completed surveys 

were received? 

(These questions can allow 

calculation of a response rate.) 

(3) Data Sources 

For FY 2018 payment determination 

and subsequent years, we are proposing 

that data collection for this structural 

measure for hospitals occur from 

January 1 through December 31 of each 

calendar year, with data submission 

occurring the following year. For the 

first year, data collection would be from 

January 1, 2016 through December 31, 

2016. These data will be collected via a 

Web-based tool available on the 

QualityNet Web site. 

We are inviting public comment on 

our proposal to adopt the Hospital 

Survey on Patient Safety Culture 

measure for the FY 2018 payment 

determination and subsequent years. 

b. Clinical Episode-Based Payment 

Measures 

(1) Background 

Clinical episode-based payment 

measures are clinically coherent 

groupings of healthcare services that can 

be used to assess providers’ resource 

use. Combined with other clinical 

quality measures, they contribute to the 

overall picture of providers’ clinical 

effectiveness and efficiency. Episodebased performance measurement allows 

meaningful comparisons between 

providers based on resource use for 

certain clinical conditions or 

procedures, as noted in the NQF report 

for the ‘‘Episode Grouper Evaluation 

Criteria’’ project available at: http://

www.qualityforum.org/Publications/

2014/09/Evaluating_Episode_Groupers_

_A_Report_from_the_National_Quality_

Forum.aspx) and in various peerreviewed articles.106 Episode-based 

measurement further supports CMS’ 

efforts in response to the mandate in 

section 3003 of the Affordable Care Act 

that the Secretary develop an episode 

grouper to improve care efficiency and 

quality. 

We are proposing four clinical 

episode-based payment measures for 

inclusion in the Hospital IQR Program 

beginning with the FY 2018 payment 

determination: The Kidney/Urinary 

Tract Infection Clinical Episode-Based 

Payment measure, the Cellulitis Clinical 

Episode-Based Payment measure, the 

Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment measure, and 

the Lumbar Spine Fusion/Refusion 

Clinical Episode-Based Payment 

measure. The proposed measures 

evaluate the difference between 

observed and expected episode cost at 

the episode level before comparing at 

the provider level. 

The MAP conditionally supported 

these measures pending NQF 

endorsement.107 Once the call for 

measures for the Cost and Resource Use 

project at NQF is announced, these 

measures will be submitted for 

endorsement. 

The measures we are proposing are 

described below, and detailed 

specifications can be found in the 

‘‘Measure Methodology’’ report for 

proposed episodic payment measures, 

available at: http://www.qualitynet.org > 

Hospital-Inpatient > ClaimsBasedMeasures > Proposed episodic 

payment measures > Measure 

Methodology. The measures follow the 

general construction of the previously 

adopted, NQF-endorsed, Hospital IQR 

Program measure, PaymentStandardized Medicare Spending per 

Beneficiary (MSPB), described in the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51626) and include standardized 

payments for Medicare Part A and Part 

B services.108 Similar to the MSPB 

measure, the episodes are risk adjusted 

for individual patient characteristics 

and other factors (for example, attributes 

of inpatient stays). Unlike the MSPB 

measure however, these clinical 

episode-based measures include only 

Medicare Part A and B services that are 

clinically related to the triggering 

diagnosis or procedure. 

Mathematically, the methodology 

described below first computes the 

provider’s Episode Amount (calculated 

as the average of the ratios of each 

episode’s observed costs to its expected 

costs multiplied by the national average 

observed episode cost) and then divides 

the provider’s Episode Amount by the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24568 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

109The number of episodes and associated costs 

are calculated using the methodology for 

developing hospital-based episode measures 

proposed by Acumen LLC and outlined in the 

supplemental documentation for the FY 2015 IPPS 

and LTCH Prospective Payment System Proposed 

Rule. Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

hospital-value-based-purchasing/index.html. 

episode-weighted median of all providers’ Episode Amounts (as shown 

in equation (A) below). 

where 

Oij = observed episode cost for episode i in 

provider j, 

Eij = expected episode cost for episode i in 

provider j, 

Oi∈I = average observed episode cost across 

all episodes i nationally, and 

nj = total number of episodes for provider j. 

This methodology builds on that 

which was submitted to the MAP, in 

response to MAP feedback, and in order 

to yield a national episode-weighted 

measure. We are proposing these 

clinical episode-based payment 

measures because they meet the 

following episode selection criteria we 

established for the purpose of selecting 

the best conditions and procedures to 

begin with, for clinical episode-based 

payment measures: (1) The condition 

constitutes a significant share of 

Medicare payments and potential 

savings for hospitalized patients during 

and surrounding a hospital stay; (2) 

there was a high degree of agreement 

among clinical experts consulted for 

this project that standardized Medicare 

payments for services provided during 

this episode can be linked to the care 

provided during the hospitalization; (3) 

episodes of care for the condition are 

comprised of a substantial proportion of 

payments and potential savings for 

postacute care, indicating episode 

payment differences are driven by 

utilization outside of the MS–DRG 

payment; (4) episodes of care for the 

condition reflect high variation in postdischarge payments, enabling 

differentiation among hospitals; and (5) 

the medical condition is managed by 

general medicine physicians or 

hospitalists and the surgical conditions 

are managed by surgical subspecialists, 

enabling comparison between similar 

practitioners. 

(2) Kidney/Urinary Tract Infection 

Clinical Episode-Based Payment 

Measure 

(A) Background 

Inpatient hospital stays and 

associated services assessed by the 

Kidney/Urinary Tract Infection Clinical 

Episode-Based Payment measure have 

high costs with substantial variation. In 

CY 2012, Medicare FFS beneficiaries 

experienced over 234,000 kidney/

urinary tract infection episodes 

triggered by related inpatient stays.109

Payment-standardized, risk-adjusted 

episode costs for these episodes (cost of 

the hospitalization plus the cost of 

clinically related services in the episode 

window) totaled more than $2.5 billion 

in 2012, with an average episode cost of 

over $10,000. There is substantial 

variation in kidney/urinary tract 

infection episode costs—ranging from 

approximately $4,800 at the 5th 

percentile to approximately $27,000 at 

the 95th—that is driven by variation in 

post-discharge costs clinically-related to 

the inpatient hospitalization. These 

clinically-related post-discharge costs 

are an indicator of the quality of care 

provided during the hospitalization. 

The MAP conditionally supported 

this measure pending NQF review and 

endorsement. Members noted that this 

measure addresses the cost of care for 

common conditions, but other members 

expressed caution that the most efficient 

providers may reduce overall 

hospitalizations and that the remaining 

hospitalizations may be a biased sample 

for measuring performance across 

providers. In response to this concern, 

we note that this measure is limited by 

design to the inpatient hospital, which 

means that resource use is evaluated 

only for patients that have been 

hospitalized for the episode condition, 

and providers are evaluated relative to 

other providers treating hospitalized 

patients. To address the concern that 

providers involved in the 

hospitalization of only the most 

complex cases might be disadvantaged 

under the measure, we note that the 

episode is risk-adjusted to account for 

differences in patient characteristics 

that may affect costs, such that expected 

costs for more complex patients will be 

higher and expected costs for less 

complex patients will be lower. Risk 

adjustment is described in section 

VIII.A.7.b.(7)(B) of the preamble of this 

proposed rule. Once the call for 

measures for the Cost and Resource Use 

project at NQF is announced, this 

measure will be submitted for 

endorsement. 

We are proposing this measure in the 

Hospital IQR Program under the 

exception authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to efficiency that have been 

endorsed by the NQF and we were 

unable to identify any NQF-endorsed 

measures that assess kidney/urinary 

tract infection. We also are not aware of 

any other measures that assess kidney/ 

urinary tract infection treatment 

efficiency and found no other feasible 

and practical measures on this topic. 

(B) Overview of Measure 

The Kidney/Urinary Tract Infection 

Clinical Episode-Based Payment 

measure includes the set of services 

provided to treat, manage, diagnose, and 

follow up on (including postacute care) 

a kidney/urinary tract infection-related 

hospital admission. This measure, like 

the NQF-endorsed MSPB measure, 

assesses the cost of services initiated 

during an episode that spans the period 

immediately prior to, during, and 

following a beneficiary’s hospital stay 

(the ‘‘episode window’’). In contrast to 

the MSPB measure, however, this 

measure includes Medicare payments 

for services during the episode window 

only if they are clinically related to the 

health condition that was treated during 

the index hospital stay. 

(C) Data Sources 

The Kidney/Urinary Tract Infection 

Clinical Episode-Based Payment 

measure is an administrative claimsbased measure. It uses Part A and Part 

B Medicare administrative claims data 

from Medicare FFS beneficiaries 

hospitalized with an MS–DRG that 

identifies a kidney/urinary tract 

infection. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP30AP15.001</GPH>
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24569 

110The number of episodes and associated costs 

are calculated using the methodology for 

developing hospital-based episode measures 

proposed by Acumen LLC and outlined in the 

supplemental documentation for the FY 2015 IPPS 

and LTCH Prospective Payment System Proposed 

Rule. Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

hospital-value-based-purchasing/index.html. 

(D) Measure Calculation 

The measure sums the Medicare 

payment amounts for clinically related 

Part A and Part B services provided 

during the episode window and 

attributes them to the hospital at which 

the index hospital stay occurred. 

Medicare payments included in this 

episode-based measure are standardized 

and risk-adjusted as described later in 

section VIII.A.7.b.(7)(B) of the preamble 

of this proposed rule. The period of 

performance for the measure is one year, 

beginning with calendar year 2016. 

Similar to the MSPB measure’s 

construction, this measure is expressed 

as a risk-adjusted ratio, which allows for 

ease of comparison over time, without 

need to adjust for inflation or any 

potential changes in CMS payment 

policy. The numerator is the Episode 

Amount, calculated as the average of the 

ratios of each episode’s observed costs 

to its expected costs multiplied by the 

national average observed episode cost. 

The denominator is the episodeweighted median of all providers’ 

Episode Amounts. A kidney/urinary 

tract infection episode begins 3 days 

prior to the initial (that is, index) 

admission and extends 30 days 

following the discharge from the index 

hospital stay. 

(E) Cohort 

The measure cohort includes 

Medicare FFS beneficiaries hospitalized 

with an MS–DRG that indicates a 

kidney/urinary tract infection. 

Additional details including the 

exclusion criteria are described in 

section VIII.A.7.b.(6) of the preamble of 

this proposed rule. 

We are inviting public comment on 

our proposal to adopt the Kidney/

Urinary Tract Infection Clinical 

Episode-Based Payment measure for the 

FY 2018 payment determination and 

subsequent years. 

(3) Cellulitis Clinical Episode-Based 

Payment Measure 

(A) Background 

Inpatient hospital stays and 

associated services assessed by the 

Cellulitis Clinical Episode-Based 

Payment measure have high costs with 

substantial variation. In CY 2012, 

Medicare FFS beneficiaries experienced 

more than 143,000 cellulitis episodes 

triggered by related inpatient stays.110

Payment-standardized, risk-adjusted 

episode costs for these episodes (cost of 

the hospitalization plus the cost of 

clinically related services in the episode 

window) totaled more than $1.4 billion 

in 2012, with an average episode cost of 

approximately $10,000. There is 

substantial variation in cellulitis 

episode costs—ranging from about 

$5,000 at the 5th percentile to about 

$24,000 at the 95th—that is driven by 

variation in post-discharge costs 

clinically-related to the inpatient 

hospitalization. These clinically related 

post-discharge costs are an indicator of 

the quality of care provided during the 

hospitalization. 

The MAP conditionally supported 

this measure pending NQF review and 

endorsement. Members noted that this 

measure addresses the cost of care for an 

important condition. Other members 

expressed caution on the use of this 

measure noting that cellulitis is a highly 

variable condition that may be 

challenging to measure using an 

episode-based framework. Once the call 

for measures for the Cost and Resource 

Use project at NQF is announced, this 

measure will be submitted for 

endorsement. We note that there is 

substantial variation in cellulitis 

episode costs that is driven by variation 

in post-discharge costs clinically-related 

to the inpatient hospitalization. This 

variation suggests that there may be 

opportunity to improve the efficiency of 

care for cellulitis treatment. 

We are proposing this measure in the 

Hospital IQR Program under the 

exception authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to efficiency that have been 

endorsed by the NQF and we were 

unable to identify any NQF-endorsed 

measures that assess cellulitis. We also 

are not aware of any other measures that 

assess cellulitis treatment efficiency, 

and found no other feasible and 

practical measures on this topic. 

(B) Overview of Measure 

The Cellulitis Clinical Episode-Based 

Payment measure includes the set of 

services provided to treat, manage, 

diagnose, and follow up on (including 

post-acute care) a cellulitis-related 

hospital admission. The Cellulitis 

Clinical Episode-Based Payment 

measure, like the MSPB measure, 

assesses the cost of services initiated 

during an episode that spans the period 

immediately prior to, during, and 

following a beneficiary’s hospital stay 

(the ‘‘episode window’’). In contrast to 

the MSPB measure, the Cellulitis 

Clinical Episode-Based Payment 

measure includes Medicare payments 

for services during the episode window 

only if they are clinically related to the 

health condition that was treated during 

the index hospital stay. 

(C) Data Sources 

The Cellulitis Clinical Episode-Based 

Payment measure is an administrative 

claims-based measure. It uses Part A 

and Part B Medicare administrative 

claims data from Medicare FFS 

beneficiaries hospitalized with an MS– 

DRG that identifies cellulitis. 

(D) Measure Calculation 

The measure sums the Medicare 

payment amounts for clinically related 

Part A and Part B services provided 

during this episode window and 

attributes them to the hospital at which 

the index hospital stay occurred. 

Medicare payments included in this 

episode-based measure are standardized 

and risk-adjusted as described in section 

VIII.A.7.b.(7)(B) of the preamble of this 

proposed rule. The period of 

performance is one year, beginning with 

calendar year 2016. Similar to the MSPB 

measure’s construction, this measure is 

expressed as a risk-adjusted ratio, which 

allows for ease of comparison over time, 

without need to adjust for inflation or 

any potential changes in CMS payment 

policy. The numerator is the Episode 

Amount, calculated as the average of the 

ratios of each episode’s observed costs 

to its expected costs multiplied by the 

national average observed episode cost. 

The denominator is the episodeweighted median of all providers’ 

Episode Amounts. A cellulitis episode 

begins 3 days prior to the initial (that is, 

index) admission and extends 30 days 

following the discharge from the index 

hospital stay. 

(E) Cohort 

The measure cohort includes 

Medicare FFS beneficiaries hospitalized 

with an MS–DRG that indicates 

cellulitis. Additional details including 

the exclusion criteria are described in 

section VIII.A.7.b.(6) of the preamble of 

this proposed rule. 

We are inviting public comment on 

our proposal to adopt the Cellulitis 

Clinical Episode-Based Payment 

measure for the FY 2018 payment 

determination and subsequent years. 

(4) Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment Measure 

(A) Background 

Inpatient hospital stays and 

associated services assessed by the GI 

Hemorrhage Clinical Episode-Based 

Payment measure have high costs with 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24570 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

111The number of episodes and associated costs 

are calculated using the methodology for 

developing hospital-based episode measures 

proposed by Acumen LLC and outlined in the 

supplemental documentation for the FY 2015 IPPS 

and LTCH Prospective Payment System Proposed 

Rule. Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

hospital-value-based-purchasing/index.html. 

112The number of episodes and associated costs 

are calculated using the methodology for 

developing hospital-based episode measures 

proposed by Acumen LLC and outlined in the 

supplemental documentation for the FY 2015 IPPS 

and LTCH Prospective Payment System Proposed 

Rule. Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

hospital-value-based-purchasing/index.html. 

substantial variation. In calendar year 

2012, Medicare FFS beneficiaries 

experienced 181,646 GI hemorrhage 

episodes triggered by related inpatient 

stays.111 Payment-standardized, riskadjusted episode costs for these 

episodes (cost of the hospitalization 

plus the cost of clinically related 

services in the episode window) totaled 

nearly $2 billion in 2012, with an 

average episode cost of about $11,000. 

There is substantial variation in GI 

hemorrhage episode costs—ranging 

from approximately $6,500 at the 5th 

percentile to approximately $23,000 at 

the 95th—that is driven by variation in 

post-discharge costs clinically related to 

the inpatient hospitalization. These 

clinically related post-discharge costs 

are an indicator of the quality of care 

provided during the hospitalization. For 

the purposes of reporting, and as 

suggested by the MAP, the GI 

hemorrhage episodes may be split into 

those treating an upper GI bleed and 

those treating a lower GI bleed due to 

clinical differences in patterns of care 

for those treatments. More information 

can be found in the supplemental 

documentation for the FY 2016 IPPS 

and LTCH Prospective Payment System 

Proposed Rule available at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/hospital-value-basedpurchasing/index.html. 

The MAP conditionally supported 

this measure pending NQF review and 

endorsement. MAP members noted that 

this measure addresses the cost of care 

for GI bleeding. Several members 

expressed caution that the most efficient 

providers may reduce overall 

hospitalizations thus those inpatient 

hospitalizations that remain are a biased 

sample for measuring performance 

across providers. In response to these 

concerns, we note that this measure is 

limited by design to GI hemorrhage 

episodes treated in the inpatient 

hospital, which means that resource use 

is evaluated only for patients that have 

been hospitalized for the episode 

condition, and providers are evaluated 

relative to other providers treating 

hospitalized patients. With regard to the 

concern that efficient providers may 

reduce hospitalizations, leaving a biased 

sample of less efficient providers, we 

note that the episode is risk-adjusted to 

account for differences in patient 

characteristics that may affect costs, 

thus to the extent that variation in 

treatment prior to hospitalization results 

in patterns of sicker (or healthier) GI 

hemorrhage patients admitted to certain 

hospitals, risk adjustment addresses 

these differences. For example, for 

providers who admit comparatively less 

complex patients to the inpatient 

hospital for treatment of GI bleeds, risk 

adjustment would cause their expected 

costs to be lower. Risk adjustment is 

described in section VIII.A.7.b.(7)(B) of 

the preamble of this proposed rule. 

Once the call for measures for the Cost 

and Resource Use project at NQF is 

announced, this measure will be 

submitted for endorsement. 

We are proposing this measure in the 

Hospital IQR Program under the 

exception authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to efficiency that have been 

endorsed by the NQF and we were 

unable to identify any NQF-endorsed 

measures that assess GI hemorrhage. We 

also are not aware of any other measures 

that assess GI hemorrhage treatment 

efficiency, and found no other feasible 

and practical measures on this topic. 

(B) Overview of Measure 

The Gastrointestinal Hemorrhage 

Clinical Episode-Based Payment 

measure includes the set of services 

provided to treat, manage, diagnose, and 

follow up on (including postacute care) 

a gastrointestinal hemorrhage-related 

hospital admission. This measure, like 

the MSPB measure, assesses the cost of 

services initiated during an episode that 

spans the period immediately prior to, 

during, and following a beneficiary’s 

hospital stay (the ‘‘episode window’’). 

In contrast to the MSPB measure, the 

Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment measure 

includes Medicare payments for 

services during the episode window 

only if they are clinically related to the 

health condition that was treated during 

the index hospital stay. 

(C) Data Sources 

The Gastrointestinal Hemorrhage 

Clinical Episode-Based Payment 

measure is an administrative claimsbased measure. It uses Part A and Part 

B Medicare administrative claims data 

from Medicare FFS beneficiaries 

hospitalized with an MS–DRG that 

identifies a gastrointestinal hemorrhage. 

(D) Measure Calculation 

The measure sums the Medicare 

payment amounts for clinically related 

Part A and Part B services provided 

during the episode window and 

attributes them to the hospital at which 

the index hospital stay occurred. 

Medicare payments included in this 

episode-based measure are standardized 

and risk-adjusted as described in section 

VIII.A.7.b.(7) of the preamble of this 

proposed rule. The period of 

performance is 1 year, beginning with 

CY 2016. Similar to the MSPB measure’s 

construction, this measure is expressed 

as a risk-adjusted ratio, which allows for 

ease of comparison over time, without 

need to adjust for inflation or any 

potential changes in CMS payment 

policy. The numerator is the Episode 

Amount, calculated as the average of the 

ratios of each episode’s observed costs 

to its expected costs multiplied by the 

national average observed episode cost. 

The denominator is the episodeweighted median of all providers’ 

Episode Amounts. A gastrointestinal 

hemorrhage episode begins 3 days prior 

to the initial (that is, index) admission 

and extends 30 days following the 

discharge from the index hospital stay. 

(E) Cohort 

The measure cohort includes 

Medicare FFS beneficiaries hospitalized 

with an MS–DRG that indicates 

gastrointestinal hemorrhage. Additional 

details including the exclusion criteria 

are described in section VIII.A.7.b.(6) of 

the preamble of this proposed rule. 

We are inviting public comment on 

our proposal to adopt the 

Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment measure for the 

FY 2018 payment determination and 

subsequent years. 

(5) Lumbar Spine Fusion/Refusion 

Clinical Episode-Based Payment 

Measure 

(A) Background 

Inpatient hospital stays and 

associated services assessed by the 

Spinal Fusion/Refusion Clinical 

Episode-Based Payment measure have 

high costs with substantial variation. In 

CY 2012, Medicare FFS beneficiaries 

experienced about 69,000 spinal fusion/ 

refusion episodes triggered by related 

inpatient stays.112 PaymentVerDate Sep<11>2014 18:20 Apr 29, 2015 Jkt 235001 PO 00000 Frm 00248 Fmt 4701 Sfmt 4702 E:\FR\FM\30APP2.SGM 30APP2

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standardized, risk-adjusted episode 

costs for these episodes (cost of the 

hospitalization plus the cost of 

clinically related services in the episode 

window) totaled more than $2.6 billion 

in 2012, with an average episode cost of 

approximately $38,000. There is 

substantial variation in spinal fusion/

refusion episode costs—ranging from 

approximately $28,000 at the 5th 

percentile to approximately $60,000 at 

the 95th—that is driven by variation in 

post-discharge costs clinically related to 

the inpatient hospitalization. These 

clinically related post-discharge costs 

are an indicator of the quality of care 

provided during the hospitalization. 

The MAP conditionally supported 

this measure pending NQF review and 

endorsement. Some members raised 

concerns that patients with cancer 

should be excluded from this measure. 

Once the call for measures for the Cost 

and Resource Use project at NQF is 

announced, this measure will be 

submitted for endorsement. We note 

that this measure is titled ‘‘Spine 

Fusion/Refusion Clinical Episode-Based 

Payment Measure’’ in the MAP 

spreadsheet. Also, the episode is riskadjusted to account for differences in 

patient characteristics, including the 

presence of cancer in the patient’s 

history, which may affect costs but are 

outside of providers’ control. Risk 

adjustment is described in section 

VIII.A.7.b.(7)(B) of the preamble of this 

proposed rule. 

We are proposing this measure in the 

Hospital IQR Program under the 

exception authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to efficiency that have been 

endorsed by the NQF and we were 

unable to identify any NQF-endorsed 

measures that assess spinal fusion/

refusion. We also are not aware of any 

other measures that assess spinal 

fusion/refusion treatment efficiency, 

and found no other feasible and 

practical measures on this topic. 

(B) Overview of Measure 

The Lumbar Spine Fusion/Refusion 

Clinical Episode-Based Payment 

measure includes the set of services 

provided to treat, manage, diagnose, and 

follow up on (including postacute care) 

a lumbar spine fusion/refusion-related 

hospital admission. The Lumbar Spine 

Fusion/Refusion Clinical Episode-Based 

Payment measure, like the MSPB 

measure, assesses the cost of services 

initiated during an episode that spans 

the period immediately prior to, during, 

and following a beneficiary’s hospital 

stay (the ‘‘episode window’’). In contrast 

to the MSPB measure, the Lumbar Spine 

Fusion/Refusion Clinical Episode-Based 

Payment measure includes Medicare 

payments for services during the 

episode window only if they are 

clinically related to the health condition 

that was treated during the index 

hospital stay. 

(C) Data Sources 

The Lumbar Spine Fusion/Refusion 

Clinical Episode-Based Payment 

measure is an administrative claimsbased measure. It uses Part A and Part 

B Medicare administrative claims data 

from Medicare FFS beneficiaries 

hospitalized with an MS–DRG and ICD– 

9–CM procedure code that identify a 

lumbar spine fusion/refusion. 

(D) Measure Calculation 

The measure sums the Medicare 

payment amounts for clinically related 

Part A and Part B services provided 

during the episode window and 

attributes them to the hospital at which 

the index hospital stay occurred. 

Medicare payments included in this 

episode-based measure are standardized 

and risk-adjusted as described in section 

VIII.A.7.b.(7) of the preamble of this 

proposed rule. The period of 

performance is 1 year, beginning with 

calendar year 2016. Similar to the MSPB 

measure’s construction, this measure is 

expressed as a risk-adjusted ratio, which 

allows for ease of comparison over time, 

without need to adjust for inflation or 

any potential changes in CMS payment 

policy. The numerator is the Episode 

Amount, calculated as the average of the 

ratios of each episode’s observed costs 

to its expected costs multiplied by the 

national average observed episode cost. 

The denominator is the episodeweighted median of all providers’ 

Episode Amounts. A lumbar spine 

fusion/refusion episode begins 3 days 

prior to the initial (that is, index) 

admission and extends 30 days 

following the discharge from the index 

hospital stay. 

(E) Cohort 

The measure cohort includes 

Medicare FFS beneficiaries hospitalized 

with an MS–DRG and ICD–9 Procedure 

code that indicate lumbar spine fusion/ 

refusion. Additional details including 

the exclusion criteria are described in 

section VIII.A.7.b.(6) of the preamble of 

this proposed rule. 

We are inviting public comment on 

our proposal to adopt the Lumbar Spine 

Fusion/Refusion Clinical Episode-Based 

Payment measure for the FY 2018 

payment determination and subsequent 

years. 

(6) Inclusion and Exclusion Criteria 

A full list of the MS–DRG codes used 

to identify beneficiaries included in the 

final cohort for each of the proposed 

episode-based payment measures can be 

found in the ‘‘FY 2016 IPPS NPRM 

Episode Supplemental Documentation’’ 

report in the ‘‘Downloads’’ section at: 

‘‘NPRM Episode Supplemental 

Documentation’’ report at: http://www.

cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/

hospital-value-based-purchasing/

index.html. 

The exclusion methodology applied 

to each of these measures is the same as 

the one used to calculate the previously 

adopted MSPB measure described in the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51626) and available in the ‘‘MSPB 

Measure Information Form’’ at: http://

www.qualitynet.org/dcs/ContentServer

?c=Page&pagename=QnetPublic%2F

Page%2FQnetTier4&cid=12287

72057350. Episodes for beneficiaries 

that meet any of the following criteria 

are excluded from the measure: 

• Lack of continuous enrollment in 

Medicare Parts A and B from 90 days 

prior to index admission through the 

end of the episode with Medicare as the 

primary payer. 

• Death date during episode window. 

• Enrollment in Medicare Advantage 

during the episode window. 

In addition, claims that meet any of 

the following criteria do not trigger, or 

open, an episode: 

• Claims with data coding errors, 

including missing date of birth or death 

dates preceding the date of the trigger 

event. 

• Claims with payment ≤0. 

• Acute inpatient stays that involved 

a transfer. 

• Claims from a non-IPPS or nonsubsection (d) hospital. 

Claims that meet the following 

criterion will not be included in an 

episode: 

• Claims with payment ≤0. 

(7) Standardization and RiskAdjustment 

(A) Standardization 

Standardization, or payment 

standardization, is the process of 

adjusting the allowed charge for a 

Medicare service to facilitate 

comparisons of resource use across 

geographic areas. Medicare payments 

included in these proposed episodebased measures would be standardized 

according to the standardization 

methodology previously finalized for 

the Hospital IQR Program MSPB 

measure in the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51626) and used for all 


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113Suter L, Grady JL, Lin Z et al.: 2013 Measure 

Updates and Specifications: Elective Primary Total 

Hip Arthroplasty (THA) And/Or Total Knee 

Arthroplasty (TKA) All-Cause Unplanned 30-Day 

Risk-Standardized Readmission Measure (Version 

2.0). 2013. http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/Hospital

QualityInits/Measure-Methodology.html. 

114Osteoarthritis. 2011; http://www.cdc.gov/

arthritis/basics/osteoarthritis.html. 

115Miller DC, Gust C, Dimick JB, Birkmeyer N, 

Skinner J, Birkmeyer JD.: Large variations in 

Medicare payments for surgery highlight savings 

potential from bundled payment programs. Health 

Aff (Millwood). Nov 2011;30(11):2107–2115. 

116 Kim N, Ott LS, Lin Z et al.: Hospital-Level, 

Risk-Standardized Payment Associated with a 90- 

Day Episode-of-Care for Elective Primary Total Hip 

Arthroplasty (THA) and/or Total Knee Arthroplasty 

(TKA) (Version 1.0). 2014. Available at: http://www.

cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospitalQualityInits/

Measure-Methodology.html. 

117National Quality Forum. The report is 

available at: http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx and 

the ‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ is available at: http://www.

qualityforum.org/map/. 

of the payment measures included in 

the Value-Based Payment Modifier 

Program. The methodology removes 

geographic payment differences, such as 

wage index and geographic practice cost 

index, incentive payment adjustments, 

and other add-on payments that support 

broader Medicare program goals, such 

as add-on payments for indirect 

graduate medical education (IME) and 

add-ons for serving a disproportionate 

share of uninsured patients (DSH). 

(B) Risk Adjustment 

Risk adjustment uses patient claims 

history to account for case-mix variation 

and other factors. The steps used to 

calculate risk-adjusted payments align 

with the NQF-endorsed MSPB method 

as specified in the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51624 through 

51626). Specifications for the riskadjustment employed in the proposed 

episode-based payment measures are 

included in the ‘‘FY 2015 IPPS NPRM 

Episode Supplemental Documentation’’ 

report, Section 4, titled ‘‘Calculating the 

Hospital-Based Episode Measure,’’ 

which can be found in the ‘‘FY 2016 

IPPS NPRM Episode Supplemental 

Documentation’’ report at: http://www.

cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/

hospital-value-based-purchasing/

index.html. 

We are inviting public comment on 

our proposals. 

c. Hospital-Level, Risk-Standardized 

Payment Associated With a 90-Day 

Episode-of-Care for Elective Primary 

Total Hip Arthroplasty (THA) and/or 

Total Knee Arthroplasty (TKA) 

(1) Background 

Between 2009 and 2012, there were 

337,419 total hip arthroplasty (THA) 

procedures and 750,569 total knee 

arthroplasty (TKA) procedures for 

Medicare FFS patients 65 years and 

older.113 More than one-third of the U.S. 

population 65 years and older suffers 

from osteoarthritis,114 a disabling 

condition for which elective THA/TKAs 

are most commonly performed. 

Estimates place the annual insurer cost 

of osteoarthritis in the United States at 

$149 billion, with Medicare payments to 

hospitals for THA/TKA exceeding $15 

billion annually.115

There is evidence of variation in 

payments at hospitals for patients 

undergoing THA and/or TKA. The mean 

90-day risk-standardized payment 

among Medicare FFS patients aged 65 or 

older with a qualifying elective primary 

THA/TKA procedure in 2010–2012 was 

$23,248, and ranged from $16,421 to 

$35,123 across 2,614 hospitals.116

However, high or low payments to 

hospitals are difficult to interpret in 

isolation. Some high payment hospitals 

may have better clinical outcomes when 

compared with low payment hospitals 

while other high payment hospitals may 

not have better outcomes. Thus, CMS 

believes that payment measures provide 

complementary information to quality 

measures. 

Quality measures for THA/TKA, such 

as: (1) Hospital-level risk-standardized 

complication rate (RSCR) following 

elective primary total hip arthroplasty 

(THA) and/or total knee arthroplasty 

(TKA) (NQF #1550) (77 FR 53515 

through 53518), and (2) Hospital-level 

risk-standardized readmission rate 

(RSRR) following elective primary total 

hip arthroplasty (THA) and/or total knee 

arthroplasty (TKA) (NQF #1551) (77 FR 

53519 through 53521), are already 

adopted in the Hospital IQR Program 

and publicly reported, making THA/

TKA an ideal procedure for which to 

assess payments for Medicare patients 

and relative hospital value. Including 

this proposed measure in the Hospital 

IQR Program and publicly reporting it 

on Hospital Compare would provide 

stakeholders with additional 

information about a hospital’s cost of 

care for THA/TKA that will complement 

information about a hospital’s quality of 

care. By including payments for 90 days 

after admission, this hospital-level 

resource use measure can capture the 

full spectrum of care and encourage 

collaboration and shared responsibility 

for patients’ health after their 

procedures. 

We are proposing to include this nonNQF-endorsed measure in the Hospital 

IQR Program under the exception 

authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

Although the proposed measure is not 

currently NQF-endorsed, we considered 

available measures that have been 

endorsed by the NQF, and were unable 

to identify any measures that assess 

hospital risk-standardized payment 

associated with a 90-day episode-of-care 

for elective primary THA/TKA. We also 

are not aware of any other 90-day 

episode-of-care THA/TKA measures that 

have been endorsed or adopted by a 

consensus organization, and found no 

other feasible and practical measures on 

this topic. 

The MAP conditionally supported 

this measure on December 10, 2014 

pending a timely review by the NQF 

Cost and Resource Use Standing 

Committee. The MAP recommended 

harmonizing and determining the most 

parsimonious approach to measures the 

costs of hip and knee replacements to 

minimize the burden and confusion of 

competing methodologies.117 Once the 

call for measures for the Cost and 

Resource Use project at NQF is 

announced, we will submit this measure 

for endorsement. In the meantime, we 

will consider ways to take these MAP 

recommendations into account. 

(2) Overview of Measure and Rationale 

for Examining Payments for a 90-Day 

Episode-of-Care 

The THA/TKA payment measure 

assesses hospital risk-standardized 

payment associated with a 90-day 

episode-of-care for elective primary 

THA/TKA for any hospital participating 

in the Hospital IQR Program. 

When considering payments for 

Medicare patients, we focused on a 90- 

day episode-of-care triggered by 

admission for several key reasons. First, 

THA and TKA procedures require 

ongoing post-discharge care. Second, 

the 90-day preset window encourages 

hospitals to optimize post-discharge 

care. Third, mechanical complications 

and wound or joint infections may 

present after 30 days and rates of these 

complications remain elevated for at 

least 90 days. Fourth, the 90-day postadmission timeframe is consistent with 

CMS’ THA/TKA complication measure, 

which captures specific complications 

up to 90 days after admission. 

Furthermore, we obtained input from a 

national Technical Expert Panel (TEP) 

on the most appropriate window for the 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24573 

episode-of-care. Based on TEP feedback, 

we chose a measure follow-up period of 

90 days that includes all payments for 

the initial 30 days of the episode, and 

all payments in a predefined set of care 

settings and services for days 31 through 

90. 

We refer readers to the measure 

methodology report and measure risk 

adjustment statistical model on our 

Measure Methodology page, under the 

‘‘Downloads’’ section of the Web page. 

We refer readers to the ‘‘Hip and Knee 

Arthroplasty Payment’’ zip file on our 

Web site at: http://cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

(3) Data Sources 

The proposed Hospital-Level, RiskStandardized Payment Associated with 

a 90-Day Episode-of-Care for Elective 

Primary THA and/or TKA measure uses 

Part A and Part B Medicare 

administrative claims data that contain 

payments for Medicare FFS 

beneficiaries who were hospitalized and 

underwent an elective THA/TKA. This 

measure will use 3 years of data. 

(4) Outcome 

The primary outcome of this measure 

is the hospital-level risk-standardized 

payment for an elective primary THA/ 

TKA episode-of-care. This measure 

captures payments for Medicare patients 

across multiple care settings, services, 

and supplies (inpatient, outpatient, 

skilled nursing facility, home health, 

hospice, physician/clinical laboratory/

ambulance services, and durable 

medical equipment, prosthetics/

orthotics, and supplies). This measure 

includes patient copayments as well as 

payments from coinsurance. While the 

approach to standardization in 

calculating payments over the episode is 

very similar to the previously adopted 

Hospital IQR measure, PaymentStandardized Medicare Spending Per 

Beneficiary (MSPB) as described in the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51626), the THA/TKA measure has 

a different cohort and risk-model. For 

more information on how MSPB is 

calculated, we refer readers to the 

measure development reports found on 

the QualityNet Web site at http://www.

qualitynet.org/dcs/ContentServer?c=

Page&pagename=QnetPublic%2FPage

%2FQnetTier4&cid=1228772057350. 

To isolate payment variation that 

reflects practice patterns rather than 

CMS payment adjustments, this 

measure excludes policy and geography 

payment adjustments unrelated to 

clinical care decisions. We achieve this 

by ‘‘stripping’’ or ‘‘standardizing’’ 

payments for each care setting. 

Stripping refers to removing geographic 

differences and policy adjustments in 

payment rates for individual services 

from the total payment for that service. 

Standardizing refers to averaging 

payments across geographic areas for 

those services where geographic 

differences in payment cannot be 

stripped. Stripping and standardizing 

the payment amounts allows for a fair 

comparison across hospitals based 

solely on payments for decisions related 

to clinical care of THA/TKA. 

By risk standardizing the payment 

measure, we are able to adjust for casemix at any given hospital and compare 

a specific hospital’s risk-standardized 

payment (RSP) to an average hospital 

with a similar case-mix. We define our 

analytic timeframe as beginning with 

the index admission for an elective 

primary THA/TKA to 90 days postadmission. The measurement includes 

all payments for the first 30 days after 

admission and only certain payments 

based on a pre-defined set of care 

settings and services for days 31–90. 

(5) Cohort 

The measure includes Medicare FFS 

patients aged 65 or older admitted for 

elective primary THA and/or TKA, and 

calculates payments made on behalf of 

these patients (including payments 

made by CMS, patients, and other 

insurers) over a 90-day episode-of-care 

beginning with the index admission. 

The measure cohort aligns with another 

previously adopted Hospital IQR 

Program measure—90-day hospital-level 

risk-standardized complication rate 

(RSCR) following elective primary THA 

and/or TKA (NQF #1550) (77 FR 53516 

through 53518). Consistent with this 

previously adopted measure, the 

proposed measure includes 

hospitalizations identified by a 

procedure code of either THA or TKA, 

as classified by the ICD–9–CM codes 

81.51 and 81.54, respectively. The 

measure includes only those 

hospitalizations from short-stay acute 

care hospitals in the index cohort and 

restricts the cohort to patients enrolled 

in FFS Medicare Parts A and B (with no 

Medicare Advantage coverage). 

(6) Inclusion and Exclusion Criteria 

This proposed measure includes 

hospitalizations for patients 65 years 

and older at the time of index 

admission. An index admission/

hospitalization is the initial admission 

for a qualifying elective primary THA/ 

TKA that triggers the 90-day episode-ofcare for this payment measure. An index 

admission is the hospitalization to 

which the RSP outcome is attributed 

and includes index admissions for 

patients having a qualifying elective 

primary THA/TKA procedure. The 

measure excludes the following 

admissions from the measure cohort: (1) 

Admissions for patients without at least 

90 days of post-admission enrollment in 

FFS Medicare Parts A and B because 

this is necessary to identify the outcome 

(payments) in the dataset over the 

analytic period; (2) admissions for 

patients discharged against medical 

advice (AMA) because hospitals had 

limited opportunity to implement high 

quality care; (3) admissions for patients 

transferred to federal hospitals because 

we do not have claims data for these 

hospitals, so including these patients 

would cause payments to be 

underestimated; (4) admissions for 

patients with more than two THA/TKA 

procedure codes during the index 

hospitalization because, although 

clinically possible, it is highly unlikely 

that patients would receive more than 

two elective THA/TKA procedures in 

one hospitalization, and this may reflect 

a coding error; (5) admissions that could 

not be matched to admissions in the 

THA/TKA complication measure 

because, as part of our data processing, 

we matched our index THA/TKA 

admissions to the THA/TKA 

complication measure cohort to obtain 

the risk-adjustment variables; and (6) 

admissions without a DRG weight and 

the provider received no payment 

because, without either DRG weight or 

payment data, we cannot calculate a 

payment for the patient’s index 

admission. 

(7) Risk Adjustment 

The measure adjusts for differences 

across hospitals in how payments are 

affected by patient comorbidities 

relative to patients cared for by other 

hospitals. We refer readers to the 

measure risk adjustment statistical 

model on our Measure Methodology 

Web page, under the ‘‘Downloads’’ 

section of the Web page. Please see the 

‘‘Hip and Knee Arthroplasty Payment’’ 

zip file on our Web site at: http://

cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. 

(8) Calculating the Risk-Standardized 

Payment (RSP) 

The measure is calculated using a 

hierarchical generalized linear model 

with a log link and an inverse Gaussian 

distribution, which is a widely accepted 

statistical method that enables fair 

evaluation of relative hospital 

performance by taking into account 

patient risk factors as well as the 


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(AHRQ). Healthcare Cost and Utilization Project 

(HCUP) http://hcupnet.ahrq.gov/. 

119Torio CM, Andrews RM.: National Inpatient 

Hospital Costs: The Most Expensive Conditions by 

Payer, 2011. HCUP Statistical Brief #160. 2013; 

http://www.hcup-us.ahrq.gov/reports/statbriefs/

sb160.jsp. 

120 Krumholz HM, Merrill AR, Schone EM, et al.: 

Patterns of hospital performance in acute 

myocardial infarction and heart failure 30-day 

mortality and readmission. Circulation. 

Cardiovascular Quality & Outcomes. Sep 

2009;2(5):407–413. 

121Bernheim SM, Grady JN, Lin Z, et al.: National 

patterns of risk-standardized mortality and 

readmission for acute myocardial infarction and 

heart failure. Update on publicly reported outcomes 

measures based on the 2010 release. Circulation. 

Cardiovascular Quality & Outcomes. Sep 

2010;3(5):459–467. 

122Centers for Medicare and Medicaid Services. 

Medicare Hospital Quality Chartbook Performance 

Report on Outcome Measures September 2013. 

September 2013; http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

HospitalQualityInits/Downloads/-MedicareHospital-Quality-Chartbook-2013.pdf. 

123Rising KL, White LF, Fernandez WG, Boutwell 

AE.: Emergency Department Visits After Hospital 

Discharge: A Missing Part of the Equation. Annals 

of Emergency Medicine. 2013(0). 

124 Vashi AA, Fox JP, Carr BG, et al.: Use of 

hospital-based acute care among patients recently 

discharged from the hospital. JAMA: the journal of 

the American Medical Association. Jan 23 

2013;309(4):364–371. 

125 Venkatesh AK GB, Gibson Chambers JJ, Baugh 

CW, Bohan JS, Schuur JD.: Use of Observation Care 

in US Emergency Departments, 2001 to 2008. PLoS 

One. September 2011;6(9):e24326. 

126Schuur JD, Baugh CW, Hess EP, Hilton JA, 

Pines JM, Asplin BR.: Critical pathways for postemergency outpatient diagnosis and treatment: tools 

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Medicare enrollees being held in hospitals for 

observation raises concerns about causes and 

consequences. Health Affairs. Jun 2012;31(6):1251– 

1259. 

number of patients that a hospital treats. 

This statistical model accounts for the 

structure of the data (patients clustered 

within hospitals) and calculates: (1) 

How much variation in hospital 

payment overall is accounted for by 

patients’ individual risk factors (such as 

age and other medical conditions) and 

(2) how much variation is accounted for 

by hospital-specific performance. This 

approach appropriately models a 

positive, continuous, right-skewed 

outcome like payment and also accounts 

for the types of patients a hospital treats 

(that is, hospital case mix), the number 

of patients it treats, and the quality of 

care it provides. This hierarchical 

generalized linear model is an 

appropriate statistical approach to 

measuring quality based on patient 

outcomes when the patients are 

clustered within hospitals and sample 

sizes vary across hospitals. Clustered 

patients are within the same hospital, 

and the quality of care of the hospital 

affects all patients, so the outcomes for 

each hospital’s patients are not fully 

independent (that is, completely 

unrelated) as is assumed by many 

statistical models. As noted above, the 

measure methodology defines hospital 

case mix based on the clinical diagnoses 

provided in the hospital claims for their 

patients’ inpatient and outpatient visits 

for the 12 months prior to the THA/TKA 

hospitalization as well as select 

conditions indicated by secondary 

diagnosis codes on index admission. 

This methodology specifically does not, 

however, account for diagnoses present 

in the index admission that may 

indicate complications of care rather 

than patient comorbidities. 

The RSP is calculated as the ratio of 

predicted payments to expected 

payments and then the ratio is 

multiplied by the national unadjusted 

average payment for an episode-of-care. 

The ratio is greater than one for 

hospitals that have higher payments 

than would be expected for an average 

hospital with similar cases and less than 

one if the hospital has lower payments 

than would be expected for an average 

hospital with similar cases. This 

approach is analogous to a ratio of 

‘‘observed’’ or ‘‘crude’’ rate to an 

‘‘expected’’ or ‘‘risk-adjusted’’ rate used 

in other similar types of statistical 

analyses. The RSP is a point estimate— 

the best estimate of a hospital’s payment 

based on the hospital’s case mix. 

To calculate the measure result for the 

Hospital IQR Program, we computed an 

interval estimate, which is similar to the 

concept of a confidence interval, to 

characterize the level of uncertainty 

around the point estimate. We use the 

point estimate and interval estimate to 

determine hospital performance (for 

example, higher than expected, as 

expected, or lower than expected). The 

interval estimate indicates that the true 

value of the payment ratio lies between 

the lower limit and the upper limit of 

the interval. For more detailed 

information on the calculation 

methodology, we refer readers to our 

Measure Methodology Web page, under 

the ‘‘Downloads’’ section. We refer 

readers to the ‘‘Hip and Knee 

Arthroplasty Payment’’ zip file on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. 

We are inviting public comment on 

our proposal to adopt the HospitalLevel, Risk-Standardized Payment 

Associated with a 90-Day Episode-ofCare for Elective Primary THA and/or 

TKA measure for the FY 2018 payment 

determination and subsequent years. 

d. Excess Days in Acute Care After 

Hospitalization for Acute Myocardial 

Infarction 

(1) Background 

Acute myocardial infarction (AMI) is 

a priority area for outcomes 

measurement because it is a common 

condition associated with considerable 

morbidity, mortality, and healthcare 

spending. We note that AMI was the 

tenth most common principal discharge 

diagnosis among patients with Medicare 

in 2012.118 AMI also accounts for a large 

fraction of hospitalization costs, and it 

was the sixth most expensive condition 

billed to Medicare in 2011.119

Some of the costs for AMI can be 

attributed to high acute care utilization 

for post-discharge AMI patients in the 

form of readmissions, observation stays, 

and ED visits. We note that patients 

admitted for AMI have 

disproportionately high readmission 

rates, and that readmission rates 

following discharge for AMI are highly 

variable across hospitals in the United 

States.120 121 For the previously adopted 

Hospital IQR Program measure, Hospital 

30-Day All-Cause Risk-Standardized 

Readmission Rate (RSRR) following 

Acute Myocardial Infarction (AMI) 

Hospitalization (NQF #0505) (CY 2009 

OPPS/ASC final rule with comment 

period; 73 FR 68780 through 68781) 

(hereinafter referred to as READM–30– 

AMI), publicly reported 30-day riskstandardized readmission rates for AMI 

ranged from 17.5 percent to 30.3 percent 

for the time period between July 2011 

and June 2012.122 However, patients are 

not only at risk of requiring readmission 

in the post-discharge period. ED visits 

represent a significant proportion of 

post-discharge acute care utilization. 

Two recent studies conducted in 

patients of all ages have shown that 9.5 

percent of patients return to the ED 

within 30 days of hospital discharge and 

that about 12 percent of these patients 

are discharged from the ED and are not 

captured by the previously adopted 

Hospital IQR Program READM–30–AMI 

measure.123 124

In addition, over the past decade, the 

use of observation stays has rapidly 

increased. Specifically, between 2001 

and 2008, the use of observation 

services increased nearly three-fold,125

and significant variation has been 

demonstrated in the use of observation 

services for conditions such as chest 

pain.126 These rising rates of 

observation stays among Medicare 

beneficiaries have gained the attention 

of patients, providers, and 

policymakers.127 For example, a report 

from OIG noted that in 2012, Medicare 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24575 

128Wright S.: Hospitals’ Use of Observation Stays 

and Short Inpatient Stays for Medicare 

Beneficiaries, OEI–02–12–00040. Washington, DC: 

Department of Health and Human Services: Office 

of Inspector General July 29, 2013. 

129Wright S.: Hospitals’ Use of Observation Stays 

and Short Inpatient Stays for Medicare 

Beneficiaries, OEI–02–12–00040. Washington, DC: 

Department of Health and Human Services: Office 

of Inspector General July 29, 2013. 

130Carlson J.: Faulty Gauge? Readmissions are 

down, but observational-status patients are up and 

that could skew Medicare numbers. Modern 

Healthcare. June 8, 2013 2013. 

beneficiaries had 1.5 million 

observation stays.128 Many of these 

observation stays lasted longer than the 

intended one day. This OIG report also 

noted the potential relationship between 

hospital use of observation stays as an 

alternative to short-stay inpatient 

hospitalizations as a response to 

changing hospital payment 

incentives.129

Thus, in the context of the previously 

adopted and publicly reported READM– 

30–AMI measure, the increasing use of 

ED visits and observation stays has 

raised concerns that the READM–30– 

AMI measure does not capture the full 

range of unplanned acute care in the 

post-discharge period. In particular, 

there exists concern that high use of 

observation stays could in some cases 

replace readmissions, and hospitals 

with high rates of observation stays in 

the post-discharge period may therefore 

have low readmission rates that do not 

accurately reflect the quality of care.130

In response to these concerns, CMS 

improved on a previously existing nonHospital IQR Program measure entitled 

‘‘30-Day Post-Hospital AMI Discharge 

Care Transition Composite’’ (NQF 

#0698). The improved measure (now 

called Excess Days in Acute Care after 

Hospitalization for Acute Myocardial 

Infarction) is a risk-adjusted outcome 

measure for AMI that incorporates the 

full range of acute care use that patients 

may experience post-discharge: Hospital 

readmissions, observation stays, and ED 

visits. 

The measure assesses all-cause acute 

care utilization for post-discharge AMI 

patients for several reasons. First, from 

the patient perspective, acute care 

utilization for any cause is undesirable. 

It is costly, exposes patients to 

additional risks of medical care, 

interferes with work and family care, 

and imposes significant burden on 

caregivers. Second, limiting the measure 

to inpatient utilization may make it 

susceptible to gaming. Finally, it is often 

hard to exclude quality concerns and 

accountability based on the documented 

cause of a hospital visit. Therefore, this 

measure includes all-cause utilization. 

We are proposing to include this 

improved measure under the exception 

authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered existing measures 

related to care transitions that have been 

endorsed by the NQF. Existing process 

measures capture many important 

domains of care transitions such as 

education, medication reconciliation 

and follow-up, but all require chart 

review and manual abstraction. Existing 

outcome measures are focused entirely 

on readmissions or complications and 

do not include observation stays or ED 

visits. We also are not aware of any 

other measures that assess the quality of 

transitional care by measuring 30-day 

risk-standardized days in acute care 

(hospital readmissions, observation 

stays, and ED visits) following 

hospitalization for AMI that have been 

endorsed or adopted by a consensus 

organization, and found no other 

feasible and practical measures on this 

topic. 

The MAP conditionally supported 

this measure on the condition that this 

measure is reviewed by NQF and 

endorsed. We refer readers to the 

Spreadsheet of MAP 2015 Final 

Recommendations available at: http://

www.qualityforum.org/map/, and note 

that in the document, this measure is 

entitled ‘‘Hospital 30-day, all-cause, 

unplanned risk-standardized days in 

acute care following acute myocardial 

infarction (AMI) hospitalization.’’ In 

particular, MAP members noted that the 

measure should be considered for SDS 

adjustment in the upcoming NQF trial 

period, reviewed for the empirical and 

conceptual relationship between SDS 

factors and risk-standardized days 

following acute care, and endorsed with 

appropriate consideration of SDS factors 

as determined by NQF standing 

committees. Some MAP members noted 

this measure could help address 

concerns about the growing use of 

observation stays. We note that this 

measure will be submitted to NQF with 

appropriate consideration for SDS, if 

required, for endorsement proceedings 

once an appropriate measure 

endorsement project has a call for 

measures. 

(2) Overview of Measure 

This Excess Days in Acute Care after 

Hospitalization for AMI measure is a 

risk-standardized outcome measure that 

compares the number of days that 

patients are predicted to spend in acute 

care across the full spectrum of possible 

acute care events (hospital 

readmissions, observation stays, and ED 

visits) after discharge from a hospital for 

AMI, compared to the days expected 

based on their degree of illness. 

(3) Data Sources 

The proposed measure is 

administrative claims-based and will 

use 3 years of data. It uses Part A and 

Part B Medicare administrative claims 

data from Medicare FFS beneficiaries 

hospitalized for AMI. 

(4) Outcome 

The outcome of the measure is the 

excess number of days patients spend in 

acute care (hospital readmissions, 

observation stays, and ED visits) per 100 

discharges during the first 30 days after 

discharge from the hospital, relative to 

the number spent by the same patients 

discharged from an average hospital. 

The measure defines days in acute care 

as days spent: (1) In an ED, (2) admitted 

to observation status, or (3) admitted as 

an unplanned readmission for any cause 

within 30 days from the date of 

discharge from the index AMI 

hospitalization. Readmission days are 

calculated as the discharge date minus 

the admission date. Admissions that 

extend beyond the 30-day follow-up 

period are truncated on day 30. 

Observation days are calculated by the 

hours in observation, rounded up to the 

nearest half day. On the advice of our 

TEP, an ED treat-and-release visit is 

counted as one half day. ED visits are 

not counted as a full day because the 

majority of treat-and-release visits last 

fewer than 12 hours. 

‘‘Planned’’ readmissions are those 

planned by providers for anticipated 

medical treatment or procedures that 

must be provided in the inpatient 

setting. This measure excludes planned 

readmissions using the planned 

readmission algorithm previously 

developed for the READM–30–AMI 

measure. A more detailed discussion of 

exclusions follows below. 

The measure counts all use of acute 

care occurring in the 30-day postdischarge period. For example, if a 

patient returns to the ED three times, the 

measure counts each ED visit as a halfday. Similarly, if a patient has two 

hospitalizations within 30 days, the 

days spent in each are counted. We take 

this approach to capture the full patient 

experience of need for acute care in the 

post-discharge period. 

(5) Cohort 

We defined the eligible cohort using 

the same criteria as the existing Hospital 

IQR Program measure, READM–30– 

AMI, except that this proposed measure 

does not include patients admitted to 

Veterans Administration hospitals. That 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24576 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

131Agency for Healthcare Research and Quality 

(AHRQ). Healthcare Cost and Utilization Project 

(HCUP) http://hcupnet.ahrq.gov/. 

is, the cohort includes Medicare FFS 

patients aged 65 years or older: (1) With 

a principal discharge diagnosis of AMI; 

(2) enrolled in Part A and Part B 

Medicare for the 12 months prior to the 

date of admission, and enrolled in Part 

A during the index admission; (3) who 

were discharged from a non-Federal 

acute care hospital; (4) who were not 

transferred to another acute care facility; 

and (5) were alive at discharge. We 

defined the cohorts using the following 

ICD–9–CM diagnosis codes identified in 

inpatient claims data: 

• 410.00 (Acute myocardial infarction 

of anterolateral wall, episode of care 

unspecified); 

• 410.01 (Acute myocardial infarction 

of anterolateral wall, initial episode of 

care); 

• 410.10 (Acute myocardial infarction 

of other anterior wall, episode of care 

unspecified); 

• 410.11 (Acute myocardial infarction 

of other anterior wall, initial episode of 

care); 

• 410.20 (Acute myocardial infarction 

of inferolateral wall, episode of care 

unspecified); 

• 410.21 (Acute myocardial infarction 

of inferolateral wall, initial episode of 

care); 

• 410.30 (Acute myocardial infarction 

of inferoposterior wall, episode of care 

unspecified); 

• 410.31 (Acute myocardial infarction 

of inferoposterior wall, initial episode of 

care); 

• 410.40 (Acute myocardial infarction 

of other inferior wall, episode of care 

unspecified); 

• 410.41 (Acute myocardial infarction 

of other inferior wall, initial episode of 

care); 

• 410.50 (Acute myocardial infarction 

of other lateral wall, episode of care 

unspecified); 

• 410.51 (Acute myocardial infarction 

of other lateral wall, initial episode of 

care); 

• 410.60 (True posterior wall 

infarction, episode of care unspecified); 

• 410.61 (True posterior wall 

infarction, initial episode of care); 

• 410.70 (Subendocardial infarction, 

episode of care unspecified); 

• 410.71 (Subendocardial infarction, 

initial episode of care); 

• 410.80 (Acute myocardial infarction 

of other specified sites, episode of care 

unspecified); 

• 410.81 (Acute myocardial infarction 

of other specified sites, initial episode of 

care); 

• 410.90 (Acute myocardial infarction 

of unspecified site, episode of care 

unspecified); 

• 410.91 (Acute myocardial infarction 

of unspecified site, initial episode of 

care). 

(6) Exclusion Criteria 

The measure excludes the following 

admissions from the measure cohort: (1) 

Hospitalizations without at least 30 days 

of post-discharge enrollment in Part A 

and Part B FFS Medicare because the 

30-day outcome cannot be assessed in 

this group since claims data are used to 

determine whether a patient was 

readmitted, was placed under 

observation, or visited the ED; (2) 

discharged against medical advice 

(AMA) because providers did not have 

the opportunity to deliver full care and 

prepare the patient for discharge; (3) 

hospitalizations for patients admitted 

and discharged on the same day (and 

not transferred or deceased) because 

these patients likely did not suffer 

clinically significant AMI; and (4) 

hospitalizations for patients with an 

index admission within 30 days of a 

previous index admission because 

additional AMI admissions within 30 

days are part of the outcome, and we 

choose not to count a single admission 

both as an index admission and a 

readmission for another index 

admission. 

(7) Risk-Adjustment 

The measure adjusts for variables that 

are clinically relevant and have strong 

relationships with the outcome. The 

measure seeks to adjust for case-mix 

differences among hospitals based on 

the clinical status of the patient at the 

time of the index admission. 

Accordingly, only comorbidities that 

convey information about the patient at 

that time or in the 12 months prior, and 

not complications that arise during the 

course of the index hospitalization, are 

included in the risk adjustment. The 

measure does not adjust for patients’ 

admission source or their discharge 

disposition (for example, skilled nursing 

facility) because these factors are 

associated with the structure of the 

healthcare system, not solely patients’ 

clinical comorbidities. Regional 

differences in the availability of postacute care providers and practice 

patterns might exert undue influence on 

model results. In addition, these data 

fields are not audited and are not as 

reliable as diagnosis codes. 

The outcome is risk adjusted using a 

two-part random effects model. This 

statistical model, often referred to as a 

‘‘hurdle’’ model, accounts for the 

structure of the data (patients clustered 

within hospitals) and the observed 

distribution of the outcome. 

Specifically, it models the number of 

acute care days for each patient as: (a) 

A probability that they have a non-zero 

number of days; and (b) a number of 

days, given that this number is nonzero. The first part is specified as a logit 

model, and the second part is specified 

as a Poisson model, with both parts 

having the same risk-adjustment 

variables and each part having a random 

effect. This is an accepted statistical 

method that explicitly estimates how 

much of the variation in acute care days 

is accounted for by patient risk factors, 

how much by the hospital where the 

patient is treated, and how much is 

explained by neither. This model is 

used to calculate the predicted 

(including random effects) and expected 

(assuming random effects are zero) 

number of days for each patient, and the 

average difference between these for 

each hospital is used to construct the 

risk-standardized Excess Acute Care 

Days. 

(8) Calculating Excess Acute Care Days 

(EACDs) 

The EACD is calculated as the 

difference between the average of the 

predicted number of days spent in acute 

care for patients discharged from each 

hospital and the average number of days 

that would have been expected if those 

patients had been cared for at an average 

hospital, and then the difference is 

multiplied by 100 so that EACD 

represents EACD per 100 discharges. We 

multiply the final measure by 100 to be 

consistent with the reporting of the 

existing READM–30–AMI measure. A 

positive result indicates that patients 

spend more days in acute care postdischarge than expected; a negative 

result indicates that patients spend 

fewer days in acute care than expected. 

We are inviting public comment on 

our proposal to adopt the Excess Days 

in Acute Care after Hospitalization for 

Acute Myocardial Infarction measure for 

the FY 2018 payment determination and 

subsequent years. 

e. Excess Days in Acute Care After 

Hospitalization for Heart Failure 

(1) Background 

Heart failure is a priority area for 

outcomes measurement because it is a 

common condition associated with 

considerable morbidity, mortality, and 

healthcare spending. Heart failure was 

the second most common principal 

discharge diagnosis among patients with 

Medicare in 2012.131 Heart failure also 

accounts for a large fraction of 

hospitalization costs, and it was the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24577 

132Torio CM, Andrews RM. National Inpatient 

Hospital Costs: The Most Expensive Conditions by 

Payer, 2011. HCUP Statistical Brief #160. 2013; 

Available at: http://www.hcup-us.ahrq.gov/reports/

statbriefs/sb160.jsp. 

133 Krumholz HM, Merrill AR, Schone EM, et al.: 

Patterns of hospital performance in acute 

myocardial infarction and heart failure 30-day 

mortality and readmission. Circulation. 

Cardiovascular Quality & Outcomes. Sep 

2009;2(5):407–413. 

134Bernheim SM, Grady JN, Lin Z, et al.: National 

patterns of risk-standardized mortality and 

readmission for acute myocardial infarction and 

heart failure. Update on publicly reported outcomes 

measures based on the 2010 release. Circulation. 

Cardiovascular Quality & Outcomes. Sep 

2010;3(5):459–467. 

135Centers for Medicare and Medicaid Services. 

Medicare Hospital Quality Chartbook Performance 

Report on Outcome Measures September 2013. 

September 2013; Available at: http://www.cms.gov/ 

Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/- 

Medicare-Hospital-Quality-Chartbook-2013.pdf. 

136Rising KL, White LF, Fernandez WG, Boutwell 

AE.: Emergency Department Visits After Hospital 

Discharge: A Missing Part of the Equation. Annals 

of Emergency Medicine. 2013(0). 

137 Vashi AA, Fox JP, Carr BG, et al.: Use of 

hospital-based acute care among patients recently 

discharged from the hospital. JAMA: the journal of 

the American Medical Association. Jan 23 

2013;309(4):364–371. 

138 Vashi AA, Fox JP, Carr BG, et al.: Use of 

hospital-based acute care among patients recently 

discharged from the hospital. JAMA:The journal of 

the American Medical Association. Jan 23 

2013;309(4):364–371. 

139 Venkatesh AK GB, Gibson Chambers JJ, Baugh 

CW, Bohan JS, Schuur JD.: Use of Observation Care 

in US Emergency Departments, 2001 to 2008. PLoS 

One. September 2011;6(9):e24326. 

140Schuur JD, Baugh CW, Hess EP, Hilton JA, 

Pines JM, Asplin BR.: Critical pathways for postemergency outpatient diagnosis and treatment: tools 

to improve the value of emergency care. Academic 

Emergency Medicine. Jun 2011;18(6):e52–63. 

141Rising KL, White LF, Fernandez WG, Boutwell 

AE.: Emergency Department Visits After Hospital 

Discharge: A Missing Part of the Equation. Annals 

of Emergency Medicine. 2013(0). 

142 Vashi AA, Fox JP, Carr BG, et al.: Use of 

hospital-based acute care among patients recently 

discharged from the hospital. JAMA: The Journal of 

the American Medical Association. Jan 23 

2013;309(4):364–371. 

143Feng Z, Wright B, Mor V.: Sharp rise in 

Medicare enrollees being held in hospitals for 

observation raises concerns about causes and 

consequences. Health Affairs. Jun 2012;31(6):1251– 

1259. 

144Wright S.: Hospitals’ Use of Observation Stays 

and Short Inpatient Stays for Medicare 

Beneficiaries, OEI–02–12–00040. Washington, DC: 

Department of Health and Human Services: Office 

of Inspector General July 29, 2013. 

145Carlson J.: Faulty Gauge? Readmissions are 

down, but observational-status patients are up and 

that could skew Medicare numbers. Modern 

Healthcare. June 8, 2013 2013. 

third most expensive condition billed to 

Medicare in 2011.132

Some of the costs for heart failure can 

be attributed to high acute care 

utilization for post-discharge heart 

failure patients in the form of 

readmissions, observation stays, and ED 

visits. Patients admitted for heart failure 

have disproportionately high 

readmission rates. Readmission rates 

following discharge for heart failure are 

highly variable across hospitals in the 

United States.133 134 For the previously 

adopted Hospital IQR Program measure, 

Hospital 30-Day All-Cause RiskStandardized Readmission Rate (RSRR) 

following Heart Failure Hospitalization 

(NQF #0330) (READM–30–HF) (73 FR 

46806 through 48610), publicly reported 

30-day risk-standardized readmission 

rates for heart failure ranged from 17.5 

percent to 30.3 percent for the time 

period between July 2011 and June 

2012.135 However, patients are not only 

at risk of requiring readmission in the 

post-discharge period. ED visits 

represent a significant proportion of 

post-discharge acute care utilization. 

Two recent studies conducted in 

patients of all ages have shown that 9.5 

percent of patients return to the ED 

within 30 days of hospital discharge and 

that about 12 percent of these patients 

are discharged from the ED and are not 

captured by the previously adopted 

Hospital IQR Program READM–30–HF 

measure.136 137 Patients returning to the 

ED after heart failure hospitalization 

most commonly return for heart failure 

recurrence and chest pain.138

In addition, over the past decade, the 

use of observation stays has rapidly 

increased. Specifically, between 2001 

and 2008, the use of observation 

services increased nearly three-fold,139

and significant variation has been 

demonstrated in the use of observation 

services for conditions such as chest 

pain.140 These rising rates of 

observation stays among Medicare 

beneficiaries have gained the attention 

of patients, providers, and 

policymakers.141 142 143 For example, a 

report from the OIG noted that in 2012, 

Medicare beneficiaries had 1.5 million 

observation stays.144 Many of these 

observation stays lasted longer than the 

intended one day. The OIG report also 

noted the potential relationship between 

hospital use of observation stays as an 

alternative to short-stay inpatient 

hospitalizations as a response to 

changing hospital payment incentives. 

Thus, in the context of the currently 

adopted and publicly reported Hospital 

IQR Program READM–30–HF measure, 

the increasing use of ED visits and 

observation stays has raised concerns 

that the READM–30–HF measure does 

not capture the full range of unplanned 

acute care in the post-discharge period. 

In particular, there exists concern that 

high use of observation stays could in 

some cases replace readmissions, and 

hospitals with high rates of observation 

stays in the post-discharge period may 

therefore have low readmission rates 

that do not accurately reflect the quality 

of care.145

In response to these concerns, we 

improved on an existing non-Hospital 

IQR Program measure entitled ‘‘30-Day 

Post-Hospital HF Discharge Care 

Transition Composite’’ (NQF #0699). 

The improved measure (now called 

Excess Days in Acute Care after 

Hospitalization for Heart Failure) is a 

risk-adjusted outcome measure for heart 

failure that incorporates the full range of 

acute care use that patients may 

experience post-discharge: hospital 

readmissions, observation stays, and ED 

visits. 

The measure assesses all-cause acute 

care utilization for post-discharge heart 

failure patients for several reasons. First, 

from the patient perspective, acute care 

utilization for any cause is undesirable. 

It is costly, exposes patients to 

additional risks of medical care, 

interferes with work and family care, 

and imposes significant burden on 

caregivers. Second, limiting the measure 

to inpatient utilization may make it 

susceptible to gaming. Finally, it is often 

hard to exclude quality concerns and 

accountability based on the documented 

cause of a hospital visit. Therefore, this 

measure includes all-cause utilization. 

We are proposing this improved 

measure in the Hospital IQR Program 

under the exception authority in section 

1886(b)(3)(B)(IX)(bb) of the Act as 

previously discussed in section VIII.A.7. 

of the preamble of this proposed rule. 

We considered other existing measures 

related to care transitions that have been 

endorsed by the NQF. Existing process 

measures capture many important 

domains of care transitions such as 

education, medication reconciliation 

and follow-up, but all require chart 

review and manual abstraction. Existing 

outcome measures are focused entirely 

on readmissions or complications and 

do not include observation stays or ED 

visits. We also are not aware of any 

other measures that assess the quality of 

transitional care by measuring 30-day 

risk-standardized days in acute care 

(hospital readmissions, observation 

stays and ED visits) following 

hospitalization for heart failure that 

have been endorsed or adopted by a 

consensus organization, and found no 

other feasible and practical measures on 

this topic. 

The MAP conditionally supported 

this measure on the condition that it is 

reviewed by NQF and endorsed. We 

note that this measure was entitled 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24578 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

‘‘Hospital 30-day, all-cause, unplanned 

risk-standardized days in acute care 

following heart failure hospitalization,’’ 

in the MAP Spreadsheet. In particular, 

MAP members noted that the measure 

should be considered for SDS 

adjustment in the upcoming NQF trial 

period, reviewed for the empirical and 

conceptual relationship between SDS 

factors and risk-standardized days 

following acute care, and endorsed with 

appropriate consideration of SDS factors 

as determined by NQF standing 

committees. Some MAP members noted 

this measure could help address 

concerns about the growing use of 

observation stays. We note that this 

measure will be submitted to NQF with 

appropriate consideration for SDS, if 

required, for endorsement proceedings 

once an appropriate measure 

endorsement project has a call for 

measures. 

(2) Overview of Measure 

This Excess Days in Acute Care after 

Hospitalization for Heart Failure 

measure is a risk-standardized outcome 

measure that compares the number of 

days that patients are predicted to spend 

in acute care across the full spectrum of 

possible acute care events (hospital 

readmissions, observation stays, and ED 

visits) after discharge from a hospital for 

heart failure, compared to the days 

expected at an average hospital, based 

on their degree of illness. 

(3) Data Sources 

The proposed measure is 

administrative claims-based and will 

use 3 years of data. It uses Part A and 

Part B Medicare administrative claims 

data from Medicare FFS beneficiaries 

hospitalized for heart failure. 

(4) Outcome 

The outcome of the measure is the 

excess number of days patients spend in 

acute care (hospital readmissions, 

observation stays, and ED visits) per 100 

discharges during the first 30 days after 

discharge from the hospital, relative to 

the number spent by the same patients 

discharged from an average hospital. 

The measure defines days in acute care 

as days spent: (1) In an ED, (2) admitted 

to observation status, or (3) admitted as 

an unplanned readmission for any cause 

within 30 days from the date of 

discharge from the index heart failure 

hospitalization. Readmission days are 

calculated as the discharge date minus 

the admission date. Admissions that 

extend beyond the 30-day follow-up 

period are truncated on day 30. 

Observation days are calculated by the 

hours in observation, rounded up to the 

nearest half day. On the advice of our 

TEP, an ED treat-and-release visit is 

counted as one half day. ED visits are 

not counted as a full day because the 

majority of treat-and-release visits last 

fewer than 12 hours. 

‘‘Planned’’ readmissions are those 

planned by providers for anticipated 

medical treatment or procedures that 

must be provided in the inpatient 

setting. This measure excludes planned 

readmissions using the planned 

readmission algorithm (78 FR 50786 

through 50787), a set of criteria for 

classifying readmissions that are likely 

to be planned among the general 

Medicare population using Medicare 

claims data, previously developed for 

Hospital IQR Program 30-day 

readmission measures, including the 

previously adopted READM–30–HF 

measure. 

The measure counts all use of acute 

care occurring in the 30-day postdischarge period. For example, if a 

patient returns to the ED three times, the 

measure counts each ED visit as a halfday. Similarly, if a patient has two 

hospitalizations within 30 days, the 

days spent in each are counted. We take 

this approach to capture the full patient 

experience of need for acute care in the 

post-discharge period. 

(5) Cohort 

We defined the eligible cohort using 

the same criteria as the previously 

adopted Hospital IQR Program READM– 

30–HF measure (73 FR 46806 through 

48610). The READM–30–HF cohort 

criteria are included in a report posted 

on our Measure Methodology Web page, 

under the ‘‘Downloads’’ section in the 

‘‘AMI, HF, PN, COPD, and Stroke 

Readmission Updates’’ zip file on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. This measure differs 

from the READM–30–HF measure 

cohort in that this measure does not 

include patients admitted to Veterans 

Administration hospitals. That is, the 

cohort includes Medicare FFS patients 

aged 65 years or older: (1) With a 

principal discharge diagnosis of heart 

failure; (2) enrolled in Part A and Part 

B Medicare for the 12 months prior to 

the date of admission, and enrolled in 

Part A during the index admission; (3) 

who were discharged from a nonFederal acute care hospital; (4) who 

were not transferred to another acute 

care facility; and (5) were alive at 

discharge. We defined the cohorts using 

the following ICD–9–CM diagnosis 

codes identified in inpatient claims 

data: 

• 402.01 (Malignant hypertensive 

heart disease with heart failure); 

• 402.11 (Benign hypertensive heart 

disease with heart failure); 

• 402.91 (Unspecified hypertensive 

heart disease with heart failure); 

• 404.01 (Hypertensive heart and 

chronic kidney disease, malignant, with 

heart failure and with chronic kidney 

disease stage I through stage IV, or 

unspecified); 

• 404.03 (Hypertensive heart and 

chronic kidney disease, malignant, with 

heart failure and with chronic kidney 

disease stage V or end stage renal 

disease); 

• 04.11 (Hypertensive heart and 

chronic kidney disease, benign, with 

heart failure and with chronic kidney 

disease stage I through stage IV, or 

unspecified); 

• 404.13 (Hypertensive heart and 

chronic kidney disease, benign, with 

heart failure and chronic kidney disease 

stage V or end stage renal disease); 

• 404.91 (Hypertensive heart and 

chronic kidney disease, unspecified, 

with heart failure and with chronic 

kidney disease stage I through stage IV, 

or unspecified); 

• 404.93 (Hypertensive heart and 

chronic kidney disease, unspecified, 

with heart failure and chronic kidney 

disease stage V or end stage renal 

disease); 

• 428.0 (Congestive heart failure, 

unspecified); 

• 428.1 (Left heart failure); 

• 428.20 (Systolic heart failure, 

unspecified); 

• 428.21 (Acute systolic heart failure); 

• 428.22 (Chronic systolic heart 

failure); 

• 428.23 (Acute on chronic systolic 

heart failure); 

• 428.30 (Diastolic heart failure, 

unspecified); 

• 428.31 (Acute diastolic heart 

failure); 

• 428.32 (Chronic diastolic heart 

failure); 

• 428.33 (Acute on chronic diastolic 

heart failure) 

• 428.40 (Combined systolic and 

diastolic heart failure, unspecified); 

• 428.41 (Acute combined systolic 

and diastolic heart failure); 

• 428.42 (Chronic combined systolic 

and diastolic heart failure); 

• 428.43 (Acute on chronic combined 

systolic and diastolic heart failure); 

• 428.9 (Heart failure, unspecified). 

(6) Exclusion Criteria 

The measure excludes the following 

admissions from the measure cohort: (1) 

Hospitalizations without at least 30 days 

of post-discharge enrollment in Part A 

and Part B FFS Medicare because the 


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30-day outcome cannot be assessed in 

this group because claims data are used 

to determine whether a patient was 

readmitted, was placed under 

observation, or visited the ED; (2) 

discharged against medical advice 

(AMA) because providers did not have 

the opportunity to deliver full care and 

prepare the patient for discharge; and 

(3) hospitalizations for patients with an 

index admission within 30 days of a 

previous index admission because 

additional heart failure admissions 

within 30 days are part of the outcome, 

and we choose not to count a single 

admission both as an index admission 

and a readmission for another index 

admission. 

(7) Risk-Adjustment 

The measure adjusts for variables that 

are clinically relevant and have strong 

relationships with the outcome. The 

measure seeks to adjust for case-mix 

differences among hospitals based on 

the clinical status of the patient at the 

time of the index admission. 

Accordingly, only comorbidities that 

convey information about the patient at 

that time or in the 12 months prior, and 

not complications that arise during the 

course of the index hospitalization, are 

included in the risk adjustment. The 

measure does not adjust for patients’ 

admission source or their discharge 

disposition (for example, skilled nursing 

facility) because these factors are 

associated with the structure of the 

health care system, not solely patients’ 

clinical comorbidities. Regional 

differences in the availability of postacute care providers and practice 

patterns might exert undue influence on 

model results. In addition, these data 

fields are not audited and are not as 

reliable as diagnosis codes. 

The outcome is risk adjusted using a 

two-part random effects model. This 

statistical model, often referred to as a 

‘‘hurdle’’ model, accounts for the 

structure of the data (patients clustered 

within hospitals) and the observed 

distribution of the outcome. 

Specifically, it models the number of 

acute care days for each patient as: (a) 

A probability that they have a non-zero 

number of days and (b) a number of 

days, given that this number is nonzero. The first part is specified as a logit 

model, and the second part is specified 

as a Poisson model, with both parts 

having the same risk-adjustment 

variables and each part having a random 

effect. This is an accepted statistical 

method that explicitly estimates how 

much of the variation in acute care days 

is accounted for by patient risk factors, 

how much by the hospital where the 

patient is treated, and how much is 

explained by neither. This model is 

used to calculate the predicted 

(including random effects) and expected 

(assuming random effects are zero) 

number of days for each patient, and the 

average difference between these for 

each hospital is used to construct the 

risk-standardized Excess Acute Care 

Days. 

(8) Calculating Excess Acute Care Days 

(EACDs) 

The EACD is calculated as the 

difference between the average of the 

predicted number of days spent in acute 

care for patients discharged from each 

hospital and the average number of days 

that would have been expected if those 

patients had been cared for at an average 

hospital, and then the difference is 

multiplied by 100 so that EACD 

represents EACD per 100 discharges. We 

multiply the final measure by 100 to be 

consistent with the reporting of the 

existing READM–30–HF measure. A 

positive result indicates that patients 

spend more days in acute care postdischarge than expected; a negative 

result indicates that patients spend 

fewer days in acute care than expected. 

We are inviting public comment on 

our proposal to adopt the Excess Days 

in Acute Care after Hospitalization for 

Heart Failure measure for the FY 2018 

payment determination and subsequent 

years. 

f. Summary of Previously Adopted and 

Proposed Hospital IQR Program 

Measure Set for the FY 2018 Payment 

Determination and Subsequent Years 

The table below outlines the Hospital 

IQR Program measure set for the FY 

2018 payment determination and 

subsequent years and includes both 

previously adopted and proposed 

measures. 

HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Short name Measure name NQF # 

NHSN 

CLABSI ...................................... National Healthcare Safety Network (NHSN) Central Line-Associated Bloodstream Infection 

(CLABSI) Outcome Measure.

0139 

Colon and Abdominal 

Hysterectomy SSI.

American College of Surgeons—Centers for Disease Control and Prevention (ACS–CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure 

• Colon Procedures .....................................................................................................................

• Hysterectomy Procedures. .......................................................................................................

0753 

CAUTI ........................................ National Healthcare Safety Network (NHSN) Catheter-associated Urinary Tract Infection (CAUTI) 

Outcome Measure.

0138 

MRSA Bacteremia ..................... National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.1716 

CDI ............................................. National Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset Clostridium 

difficile Infection (CDI) Outcome Measure.

1717 

HCP ............................................ Influenza Vaccination Coverage Among Healthcare Personnel ......................................................... 0431 

Chart-abstracted 

ED–1 * ........................................ Median Time from ED Arrival to ED Departure for Admitted ED Patients ......................................... 0495 

ED–2 * ........................................ Admit Decision Time to ED Departure Time for Admitted Patients ................................................... 0497 

Imm–2 ........................................ Influenza Immunization ....................................................................................................................... 1659 

PC–01 * ...................................... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure).0469 

Sepsis ........................................ Severe Sepsis and Septic Shock: Management Bundle (Composite Measure) ................................ 0500 

STK–04 * .................................... Thrombolytic Therapy ......................................................................................................................... 0437 

VTE–5 * ...................................... Venous Thromboembolism Discharge Instructions ............................................................................ N/A 

VTE–6 * ...................................... Incidence of Potentially Preventable Venous Thromboembolism ...................................................... N/A 


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HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued 

Short name Measure name NQF # 

Claims 

MORT–30–AMI .......................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) Hospitalization.0230 

MORT–30–HF ............................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Heart Failure 

(HF) Hospitalization.

0229 

MORT–30–PN ............................ Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Pneumonia Hospitalization.0468 

MORT–30–COPD ...................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization.1893 

STK Mortality ............................. Stroke 30-day Mortality Rate .............................................................................................................. N/A 

CABG Mortality .......................... Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery 

Bypass Graft (CABG) Surgery.

2558 

READM–30–AMI ........................ Hospital 30-Day All-Cause Risk-Standardized Readmission Rate (RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization.0505 

READM–30–HF ......................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Heart Failure (HF) Hospitalization.0330 

READM–30–PN ......................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneumonia 

Hospitalization.

0506 

READM–30–THA/TKA ............... Hospital-Level 30-Day, All-Cause Risk-Standardized Readmission Rate (RSRR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).1551 

READM–30–HWR ...................... Hospital-Wide All-Cause Unplanned Readmission Measure (HWR) ................................................. 1789 

COPD READMIT ....................... Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) Hospitalization.1891 

STK READMIT ........................... 30-Day Risk Standardized Readmission Rate Following Stroke Hospitalization ............................... N/A 

CABG READMIT ........................ Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized Readmission Rate (RSRR) Following 

Coronary Artery Bypass Graft (CABG) Surgery.

2515 

MSPB ......................................... Payment-Standardized Medicare Spending Per Beneficiary (MSPB) ................................................ 2158 

AMI Payment ............................. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Acute 

Myocardial Infarction (AMI).

2431 

HF Payment ............................... Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care For Heart 

Failure (HF).

2436 

PN Payment ............................... Hospital-Level, Risk-Standardized Payment Associated with a 30-day Episode-of-Care For Pneumonia.2579 

Hip/knee complications .............. Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip 

Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA).

1550 

PSI 4 (PSI/NSI) .......................... Death among Surgical Inpatients with Serious, Treatable Complications ......................................... 0351 

PSI 90 ........................................ Patient Safety for Selected Indicators (Composite Measure) ............................................................ 0531 

THA/TKA Payment ** ................. Hospital-Level, Risk-Standardized Payment Associated with an Episode-of-Care for Primary Elective Total Hip Arthroplasty and/or Total Knee Arthroplasty.N/A 

Kidney/UTI Payment ** ............... Kidney/Urinary Tract Infection Clinical Episode-Based Payment Measure ........................................ N/A 

Spine Fusion/Refusion Payment **.Spine Fusion/Refusion Clinical Episode-Based Payment Measure ................................................... N/A 

Cellulitis Payment ** ................... Cellulitis Clinical Episode-Based Payment Measure .......................................................................... N/A 

GI Payment ** ............................. Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure ......................................... N/A 

AMI Excess Days ** ................... Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction ............................. N/A 

HF Excess Days ** ..................... Excess Days in Acute Care after Hospitalization for Heart Failure ................................................... N/A 

Electronic Clinical Quality Measure 

AMI–2 ......................................... Aspirin Prescribed at Discharge for AMI ............................................................................................ 0142 

AMI–7a ....................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ................................................. 0164 

AMI–8a ....................................... Primary PCI Received Within 90 Minutes of Hospital Arrival ............................................................. 0163 

AMI–10 ....................................... Statin Prescribed at Discharge ........................................................................................................... N/A 

CAC–3 ........................................ Home Management Plan of Care Document Given to Patient/Caregiver .......................................... N/A 

ED–1 * ........................................ Median Time from ED Arrival to ED Departure for Admitted ED Patients ......................................... 0495 

ED–2 * ........................................ Admit Decision Time to ED Departure Time for Admitted Patients ................................................... 0497 

EHDI–1a ..................................... Hearing Screening Prior to Hospital Discharge .................................................................................. 1354 

HTN ............................................ Healthy Term Newborn ....................................................................................................................... 0716 

PC–01 * ...................................... Elective Delivery (Collected in aggregate, submitted via Web-based tool or electronic clinical quality measure).0469 

PC–05 ........................................ Exclusive Breast Milk Feeding and the Subset Measure PC–05a Exclusive Breast Milk Feeding 

Considering Mother’s Choice.

0480 

PN–6 .......................................... Initial Antibiotic Selection for Community-Acquired Pneumonia (CAP) in Immunocompetent Patients.0147 

SCIP–Inf–1a ............................... Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision .................................... 0527 

SCIP–Inf–2a ............................... Prophylactic Antibiotic Selection for Surgical Patients ....................................................................... 0528 

SCIP–Inf–9 ................................. Urinary catheter Removed on Postoperative Day 1 (POD 1) or Postoperative Day 2 (POD 2) with 

Day of Surgery Being Day Zero.

N/A 

STK–02 ...................................... Discharged on Antithrombotic Therapy .............................................................................................. 0435 

STK–03 ...................................... Anticoagulation Therapy for Atrial Fibrillation/Flutter .......................................................................... 0436 

STK–04 * .................................... Thrombolytic Therapy ......................................................................................................................... 0437 


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HOSPITAL IQR PROGRAM MEASURES FOR THE FY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS—Continued 

Short name Measure name NQF # 

STK–05 ...................................... Antithrombotic Therapy by the End of Hospital Day Two .................................................................. 0438 

STK–06 ...................................... Discharged on Statin Medication ........................................................................................................ 0439 

STK–08 ...................................... Stroke Education ................................................................................................................................. N/A 

STK–10 ...................................... Assessed for Rehabilitation ................................................................................................................ 0441 

VTE–1 ........................................ Venous Thromboembolism Prophylaxis ............................................................................................. 0371 

VTE–2 ........................................ Intensive Care Unit Venous Thromboembolism Prophylaxis ............................................................. 0372 

VTE–3 ........................................ Venous Thromboembolism Patients with Anticoagulation Overlap Therapy ..................................... 0373 

VTE–4 ........................................ Venous Thromboembolism Patients Receiving Unfractionated Heparin with Dosages/Platelet 

Count Monitoring by Protocol or Nomogram.

N/A 

VTE–5 * ...................................... Venous Thromboembolism Discharge Instructions ............................................................................ N/A 

VTE–6 * ...................................... Incidence of Potentially Preventable Venous Thromboembolism ...................................................... N/A 

Patient Survey 

HCAHPS .................................... HCAHPS + 3-Item Care Transition Measure (CTM-3) ....................................................................... 0166 

0228 

Structural 

Patient Safety Culture ** ............ Hospital Survey on Patient Safety Culture ......................................................................................... N/A 

Registry for Nursing Sensitive 

Care.

Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care ....................... N/A 

Registry for General Surgery ..... Participation in a Systematic Clinical Database Registry for Registry for General Surgery .............. N/A 

Safe Surgery Checklist .............. Safe Surgery Checklist Use ................................................................................................................ N/A 

* Measure is listed twice, as both chart-abstracted and electronic clinical quality measure. 

** Measures we are proposing beginning with FY 2018 and for subsequent years. 

8. Electronic Clinical Quality Measures 

In this proposed rule, we are 

clarifying our policy for one previously 

adopted voluntarily reported electronic 

clinical quality measure for the FY 2017 

payment determination. Specifically, we 

are clarifying our requirements for the 

submission of STK–01 for CY 2015/FY 

2017 payment determination. In 

addition, we are proposing to expand 

our electronic clinical quality measure 

policy in order to make reporting of 

electronic clinical quality measures 

required for the FY 2018 payment 

determination and subsequent years. 

a. Previously Adopted Voluntarily 

Reported Electronic Clinical Quality 

Measures for the FY 2017 Payment 

Determination 

For a discussion of our previously 

finalized electronic clinical quality 

measures and policies, we refer readers 

to the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50811 through 50819), and 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50241 through 50253; 50256 

through 50259; and 50273 through 

50276). 

b. Clarification for the Venous 

Thromboembolism (VTE) Prophylaxis 

(STK–01) Measure (NQF #0434) 

In this proposed rule, we are 

proposing to clarify reporting 

requirements for the Venous 

Thromboembolism (VTE) Prophylaxis 

(STK–01) Measure (NQF #0434). In the 

FY 2016 IPPS/LTCH PPS final rule (78 

FR 50808), we stated that hospitals need 

not report the STK–01 measure as part 

of the STK measure set if reporting 

electronically, because no electronic 

specification existed for STK–01. In 

other words, hospitals that successfully 

submit STK–02, STK–03, STK–04, STK– 

05, STK–06, STK–08, and STK–10 as 

electronic clinical quality measures are 

not required to also chart-abstract and 

submit STK–01 in order to meet 

Hospital IQR Program requirements for 

the FY 2016 payment determination. 

However, hospitals that do not submit 

the specified electronic clinical quality 

measures must continue to chartabstract and submit STK–01 as 

previously required. To review the 

details in the 2014 IPPS/LTCH PPS final 

rule, we refer readers to our Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

AcuteInpatientPPS/FY-2014-IPPS-FinalRule-Home-Page-Items/FY-2014-IPPSFinal-Rule-CMS-1599-FRegulations.html. 

We are clarifying that this policy 

continues for the CY 2015/FY 2017 

payment determination. Hospitals that 

chose to submit the STK–02, STK–03, 

STK–04, STK–05, STK–06, STK–08, and 

STK–10 as electronic clinical quality 

measures are not required to also chartabstract and submit STK–01 in order to 

meet Hospital IQR Program 

requirements for the FY 2017 payment 

determination. However, hospitals that 

do not submit the specified electronic 

clinical quality measures must continue 

to chart-abstract and submit STK–01 as 

previously required. We note that STK– 

01 is proposed for removal for CY 2016/ 

FY 2018 payment determination and 

refer readers to section VIII.A.3.b. of the 

preamble of this proposed rule for more 

details. 

We are inviting public comment on 

this proposal. 

c. Proposed Requirements for Hospitals 

To Report Electronic Clinical Quality 

Measures for the FY 2018 Payment 

Determination and Subsequent Years 

In this proposed rule, we are 

proposing to expand our electronic 

clinical quality measure policy in order 

to make reporting of electronic clinical 

quality measures required, rather than 

voluntary, under the Hospital IQR 

Program. Specifically, we are proposing 

that, beginning in CY 2016/FY 2018 

payment determination and subsequent 

years, we will require hospitals to select 

and submit 16 electronic clinical quality 

measures covering three NQS domains 

from the 28 available electronic clinical 

quality measures. For the FY 2018 

payment determination and subsequent 

years, we are proposing that hospitals 

must submit Q3 and Q4 data for 16 

measures chosen by a hospital and 

reported as electronic clinical quality 

measures. For example, for the FY 2018 

payment determination, hospitals 

would be required to submit Q3 and Q4 

CY 2016 data for 16 measures of their 

choice. This proposal is in alignment 

with the Medicare EHR Incentive 


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Program, as discussed in section 

VIII.D.2.b. of the preamble of this 

proposed rule. 

Hospitals would not fail validation 

based on these data for CY 2016/FY 

2018 payment determination reporting 

because validation for electronic 

measures is currently under 

development. In the FY 2015 IPPS/

LTCH PPS final rule (79 FR 50269 

through 50273), we finalized a proposal 

to conduct a validation pilot test for 

electronically specified measures in FY 

2015. The pilot is currently underway 

and therefore, the results are not yet 

available. 

We will delay publicly reporting 

electronic clinical quality measure data 

submitted by hospitals for CY 2016/FY 

2018 payment determination in order to 

allow time for us to evaluate the 

effectiveness of electronically reported 

clinical quality measure data. In the 

meantime, measures reported via 

electronic clinical quality measure will 

be marked with a footnote on Hospital 

Compare noting that: (1) The hospital 

submitted data via EHR; (2) data are 

being processed and analyzed; and (3) 

CMS will eventually publicly report this 

data once CMS determines the data to 

be reliable and accurate. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50815 through 50818), we 

adopted a policy under which we would 

only publicly report electronic clinical 

quality measure data under the Hospital 

IQR Program if we determined that the 

data are accurate enough to be reported. 

We believe that our current proposal to 

delay public reporting of electronic 

clinical quality measure data submitted 

by hospitals for CY 2016/FY 2018 

payment determination is also in line 

with our existing policies. In future 

rulemaking, we will continue to address 

our intent to ensure that measures meet 

the reliability and validity requirements 

set for public reporting and that the 

measures are accurate and 

understandable before measures are 

publicly reported on Hospital Compare. 

As shown in the table above entitled 

‘‘Hospital IQR Program Measures for the 

FY 2018 Payment Determination and 

Subsequent Years,’’ 6 measures (ED–1, 

ED–2, STK–04, VTE–5, VTE–6, and PC– 

01) may be reported either via chartabstraction or as electronic clinical 

quality measures. For the FY 2018 

payment determination and subsequent 

years, hospitals may either report a full 

year of data (Q1 through Q4) in 

accordance with the submission 

requirements for chart-abstracted data, 

or electronically submit two quarters of 

data (Q3 and Q4) for each of these 6 

measures. If hospitals choose to report 

these 6 measures electronically, the 

measures can be used to count toward 

the Hospital IQR Program’s 16 required 

electronic clinical quality measures. 

Hospitals choosing to report these 6 

measures via chart-abstraction must 

select other electronic measures to meet 

the requirement to report 16 electronic 

clinical quality measures. Additional 

detail on submitting electronic data for 

measures can be found in section 

VIII.A.10.d.(3) of the preamble of this 

proposed rule. 

We recognize that measure rates may 

not be comparable between measures 

reported via chart-abstraction and 

measures that are electronically 

specified. Collecting electronic measure 

data according to our proposal that 

hospitals must select and submit 16 

electronic clinical quality measures will 

help us evaluate variations in data 

capture modes (chart-abstracted versus 

electronic clinical quality measures) in 

order to determine whether and what 

adjustments are necessary for the two 

different modes of collection. We refer 

readers to section VIII.A.3.b. of the 

preamble of this proposed rule, where 

we discuss CMS’ belief that, although 

the intent of a measure is the same 

whether it is reported via chartabstraction or electronically, the 

submission modes and measure rates 

are not the same. 

We also considered two alternative 

required electronic clinical quality 

measure reporting options. Alternative 

A would require hospitals to submit 10 

of 28 quality measures: (1) VTE–1; (2) 

STK–02; (3) ED–1; (4) STK–05; (5) STK– 

06; (6) STK–10; (7) VTE–2; (8) STK–08; 

(9) ED–2; and (10) STK–03. Our data 

show that these measures are most 

frequently reported with non-zero 

values among hospitals attesting under 

2014 Meaningful Use. In addition, all 10 

of these measures have been included in 

the Hospital IQR Program measure set as 

voluntary electronic clinical quality 

measures since CY 2014/FY 2016 

payment determination (79 FR 50209 

through 50211). Alternative B would 

require hospitals to submit 10 of 28 

quality measures of each hospital’s 

choice. Both alternatives differ from our 

proposal only in the number and/or 

composition of the electronic clinical 

quality measures to be reported; that is, 

for both of these alternatives, the 

reporting periods and submission 

requirements would be the same as 

those proposed in this proposed rule. 

However, we determined not to 

pursue these alternative reporting 

options as we believe that requiring 

hospitals to report more measures 

electronically is in line with our goals 

to move towards electronic clinical 

quality measure reporting and to align 

with the EHR Incentive Program, which 

requires reporting on 16 clinical quality 

measures covering at least 3 domains. 

We believe that our proposals will 

ultimately decrease reporting burden to 

hospitals. Once capture is possible 

within EHR, the time and resources 

needed to submit quality measures data 

are significantly less compared to 

manual abstraction. Electronic clinical 

quality measure collection does not 

require hospital staff time to find and 

pull paper medical records and 

manually review them to abstract data 

elements used in measure calculation. 

We acknowledge that there are initial 

costs, but believe that long-term benefits 

associated with electronic data capture 

outweigh those costs. 

We welcome public comment on our 

proposal to require hospitals to select 

and submit 16 electronic clinical quality 

measures covering three NQS domains 

from the 28 available electronic clinical 

quality measures for eligible hospitals 

and CAHs for the FY 2018 payment 

determination and subsequent years. We 

refer readers to section VIII.A.10.d.(3) of 

the preamble of this proposed rule for 

detail on reporting periods and 

submission deadlines for electronic 

clinical quality measures. 

9. Future Considerations for 

Electronically Specified Measures: 

Consideration To Implement a New 

Type of Measure That Utilizes Core 

Clinical Data Elements 

a. Background 

We have implemented several claimsbased measures comparing hospital 

performance on 30-day mortality, 30- 

day readmission, and complications 

following hospitalization for several 

conditions and procedures in the 

Hospital IQR, Hospital Readmissions 

Reductions, and Hospital VBP 

Programs. Although these measures 

have been shown to provide valid 

information about hospital performance, 

the clinical community continues to 

express the opinion that data gathered 

directly from patients and used by 

clinicians to guide diagnostic decisions 

and treatment are preferable for risk 

adjustment of hospital outcome 

measures. In response to clinicians and 

providers’ feedback in public comment 

periods during measure development, 

and keeping with our goal to move 

toward the use of electronic health 

records (EHRs) for electronic quality 

measure reporting throughout CMS 

programs, where feasible, we are 

considering: (1) The use of core clinical 

data elements derived from EHRs for 

use in future quality measures (for 

example, risk adjustment of outcome 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24583 

146CMS.gov. Measure Management System, 

Public Comment. Hybrid Hospital-Wide 

Readmission Measure with Claims and Electronic 

Health Record Data. Available at: http://

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/MMS/

CallforPublicComment.html. 147Hybrid 30-Day Risk-standardized Acute 

Myocardial Infarction Mortality Measure with 

Electronic Health Record Extracted Risk Factors 

(Version 1.1). 

148Hybrid Hospital-Wide Readmission Measure 

with Electronic Health Record Extracted Risk 

Factors (Version 1.1). 

149 2013 Core Clinical Data Elements Technical 

Report (Version 1.1). 

150National Quality Forum. Measure Application 

Partnership. Available at: https://share.cms.gov/

center/CCSQ/QMHAG/DHMM/Measures%20

Development%20and%20Maintenance/map/

MAP%202014/MAP%202015/map_pre-rulemaking

_final_report_2015.pdf. Accessed on February 5, 

2015. 

measures); (2) the collection of 

additional administrative linkage 

variables to link a patient’s episode of 

care from EHR data with his 

administrative claim data, and (3) use of 

content exchange standards. 

During a July 2014 public comment 

period on the CMS Call for Public 

Comment Web site 146 for the hybrid 

hospital-wide readmission measure 

with administrative claims and 

electronic health record data, we 

received supportive feedback on the 

importance of the use of clinical data in 

hospital outcome measures. 

Commenters supported our efforts in 

examining new approaches to provide a 

more accurate assessment and portrayal 

of services provided by clinicians and 

hospitals, and the feedback also 

indicated their belief that it is very 

important that enriched clinical data 

from an EHR be used to supplement the 

clinically limited datasets available 

from administrative claims data. We 

note that reviewers can find the public 

comment summary report within the 

Hybrid Hospital-Wide Readmission 

Measure with Electronic Health Record 

Extracted Risk Factors (Version 1.1), in 

the ‘‘Downloads’’ section of our 

Measure Methodology Web page. We 

refer readers to the Core Clinical Data 

Elements and Hybrid Measures zip file 

found on our Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

In response to this public feedback, as 

well as CMS policy goals, we have 

identified a set of 21 clinical variables, 

or core clinical data elements, which we 

note are routinely collected on 

hospitalized adults and feasibly 

extracted from hospital EHRs. We 

believe that these core clinical data 

elements can be adapted for future use 

as part of specific quality measures. 

During our testing, we found that these 

21 core clinical data elements can be 

used to risk adjust 30-day mortality and 

30-day readmission outcome measures. 

Although we have thus far only tested 

the core clinical data elements for use 

in the risk adjustment models of 

hospital-level outcome measures, they 

could be utilized in other ways in the 

future. We anticipate that EHRs will 

continue to improve capturing of 

relevant clinical data and we also 

anticipate future expansion of the list of 

core clinical data elements. 

In the future, one way in which we 

envision using core clinical data 

elements in conjunction with other 

sources of data, such as administrative 

claims, is to calculate ‘‘hybrid’’ outcome 

measures, which are quality measures 

that utilize more than one source of 

data. We believe that these types of 

hybrid measures could enhance the 

current CMS administrative claimsbased outcome measures by utilizing 

patient clinical data captured in the 

EHR. We have shown that core clinical 

data elements captured in EHRs and 

used to risk adjust hospital outcome 

measures improve the discrimination of 

the measures, or the ability to 

distinguish good and poor performers, 

as assessed by the c-statistic, which 

evaluates the measure’s ability to 

discriminate or differentiate among high 

and low performing hospitals.147 148 149

Finally, hybrid measure results would 

need to be calculated by CMS to 

determine hospitals’ risk-adjusted rates 

relative to national rates used in public 

reporting. With hybrid measures, 

hospitals would forward data extracted 

from the EHR, and CMS would perform 

the measure calculations. 

To illustrate one way in which the 21 

core clinical data elements can be used, 

we developed two hybrid measures: (1) 

Hospital 30-Day Risk-Standardized 

Acute Myocardial Infarction (AMI) 

Mortality eMeasure (NQF #2473); and 

(2) a hybrid hospital-wide 30-day 

readmission measure, which has not yet 

undergone NQF endorsement 

proceedings. However, the latter 

measure’s development was encouraged 

by the MAP.150 We note that the 2013 

Core Clinical Data Elements Technical 

Report Version 1.1 (a methodology 

report) provides a more detailed review 

of the clinical core data elements. This 

document is posted on our Measure 

Methodology Web page, under the 

‘‘Downloads’’ section in Core Clinical 

Data Elements and Hybrid Measures zip 

file, available on our Web site at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

b. Overview of Core Clinical Data 

Elements 

Core clinical data elements are a set 

of clinical variables derived from EHRs 

that can be used to risk adjust hospital 

outcome measures. We have currently 

identified a set of 21 core clinical data 

elements that: (1) Can be feasibly 

extracted from current EHR systems; (2) 

are available on most adult patients; and 

(3) are relevant to patient outcomes 

following hospitalization. These core 

clinical data elements are listed in the 

table below. 

CURRENTLY IDENTIFIED CORE CLINICAL DATA ELEMENTS CONSIDERED FOR RISK-ADJUSTMENT OF HYBRID OUTCOME

MEASURES USED IN THE HOSPITAL SETTING

Data elements Units of measurement 

Time window for 

first captured values (hours) 

Patient Characteristics 

Age at admission ..................................................................... Years ....................................................................................... — 

Gender ..................................................................................... Male or female ........................................................................ — 

First-Captured Vital Signs 

Heart Rate ............................................................................... Beats per minute ..................................................................... 0–2 

Systolic Blood Pressure ........................................................... mmHg ...................................................................................... 0–2 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24584 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

151 2013 Core Clinical Data Elements Technical 

Report (Version 1.1). Available at: http://

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospitalQualityInits/

Measure-Methodology.html. 

152Hybrid 30-day Risk-standardized Acute 

Myocardial Infarction Mortality Measure with 

Electronic Health Record Extracted Risk Factors 

(Version 1.1) and Hybrid Hospital-Wide 

Readmission Measure with Electronic Health 

Record Extracted Risk Factors (Version 1.1). 

Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

HospitalQualityInits/Measure-Methodology.html. 

153Hybrid 30-day Risk-standardized Acute 

Myocardial Infarction Mortality Measure with 

Electronic Health Record Extracted Risk Factors 

(Version 1.1). Available at: http://www.cms.gov/

Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/MeasureMethodology.html. 

154Hybrid Hospital-Wide Readmission Measure 

with Electronic Health Record Extracted Risk 

Factors (Version 1.1). Available at: http://

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospitalQualityInits/

Measure-Methodology.html. 

CURRENTLY IDENTIFIED CORE CLINICAL DATA ELEMENTS CONSIDERED FOR RISK-ADJUSTMENT OF HYBRID OUTCOME

MEASURES USED IN THE HOSPITAL SETTING—Continued 

Data elements Units of measurement 

Time window for 

first captured values (hours) 

Diastolic Blood Pressure ......................................................... mmHg ...................................................................................... 0–2 

Respiratory Rate ...................................................................... Breath per minute .................................................................... 0–2 

Temperature ............................................................................ Degrees Fahrenheit ................................................................. 0–2 

Oxygen Saturation ................................................................... Percent .................................................................................... 0–2 

Weight ...................................................................................... Pounds .................................................................................... 0–24 

First-Captured Laboratory Results 

Hemoglobin .............................................................................. g/dL .......................................................................................... 0–24 

Hematocrit ................................................................................ % red blood cells ..................................................................... 0–24 

Platelet ..................................................................................... Count ....................................................................................... 0–24 

WBC Count .............................................................................. Cells/mL ................................................................................... 0–24 

Potassium ................................................................................ mEq/L ...................................................................................... 0–24 

Sodium ..................................................................................... mEq/L ...................................................................................... 0–24 

Chloride .................................................................................... mEq/L ...................................................................................... 0–24 

Bicarbonate .............................................................................. mmol/L ..................................................................................... 0–24 

BUN ......................................................................................... mg/dL ....................................................................................... 0–24 

Creatinine ................................................................................. mg/dL ....................................................................................... 0–24 

Glucose .................................................................................... mg/dL ....................................................................................... 0–24 

Troponin ................................................................................... ng/mL ....................................................................................... 0–24 

This set of core clinical data elements 

consists of the first captured vital signs, 

and the results of a complete blood 

count and basic chemistry panel. These 

core clinical data elements were 

selected because they were empirically 

shown to be captured during routine 

clinical practice on most adult 

hospitalized patients.151 Among other 

ways, one way in which we envision 

using these core clinical data elements 

is to risk adjust outcomes measures, 

since the elements improve the 

discrimination of hospital outcome 

measures as assessed by c-statistic and 

enhances the face validity of measures 

for the clinical community, which 

continue to express a preference for 

these types of data to account for 

patients’ severity of illness.152

In the context of risk-adjustment, 

future hybrid measures would utilize 

some or all of the 21 core clinical data 

elements listed above, as well as any 

future feasible core clinical data 

elements. For example, the Hospital 30- 

day Risk-Standardized Acute 

Myocardial Infarction (AMI) Mortality 

eMeasure (NQF #2473) uses five core 

clinical data elements: Age; heart rate; 

systolic blood pressure; troponin; and 

creatinine.153 In contrast, the hybrid 

hospital-wide measure uses 14 of the 21 

core clinical data elements (age, heart 

rate, respiratory rate, temperature, 

systolic blood pressure, oxygen 

saturation, weight, hematocrit, white 

blood cell count, sodium, potassium, 

bicarbonate, creatinine and glucose).154

These two hybrid measures illustrate 

how specific core clinical data elements 

used in a given hybrid measure will 

vary depending on the core clinical data 

elements identified as relevant for and 

predictive of that measure outcome in 

the target cohort. 

We note that the 21 core clinical data 

elements included are already routinely 

recorded in the EHR by clinical staff at 

the beginning of an inpatient encounter 

to diagnose and treat patients. 

Collection of these core clinical data 

elements are in response to stakeholder 

preference, and in particular, for the use 

of clinical information in risk models, 

but is not meant to guide or alter the 

care patients receive. We believe 

clinical staff should continue to only 

perform measurements or tests that are 

appropriate for diagnostic assessment or 

treatment of patients. 

We assessed the feasibility of 

extraction of the 21 core clinical data 

elements in models of readmission and 

mortality outcome measures (Core 

Clinical Data Elements Development is 

discussed below). For additional detail 

on testing and the measure 

methodologies, we refer readers to the 

2013 Core Clinical Data Elements 

Technical Report Version 1.1 

methodology report posted on our 

Measure Methodology Web page, under 

the ‘‘Downloads’’ section in Core 

Clinical Data Elements and Hybrid 

Measures zip file, on our Web site at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

c. Core Clinical Data Elements 

Development 

To identify this set of core clinical 

data elements, we first focused on those 

data elements that can be used to risk 

adjust hospital outcome measures. We 

developed a systematic five-step 

approach in which we: (1) Established 

a set of criteria to assess the feasibility 

of consistently identifying and 

extracting EHR data elements, and 

convened a diverse group of health 

information technology experts and end 

users to apply these criteria to EHR data; 

(2) conducted a systematic review of the 

literature to identify clinical data that 

has been shown to predict patient 

outcomes following acute care hospital 

admissions; (3) assessed the frequency 

and timing of capture of candidate data 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24585 

155 2013 Core Clinical Data Elements Technical 

Report Version 1.1. Available at: http://

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospitalQualityInits/

Measure-Methodology.html. 

156Hybrid 30-Day Risk-standardized Acute 

Myocardial Infarction Mortality Measure with 

Electronic Health Record Extracted Risk Factors 

(Version 1.1). Available at: http://www.cms.gov/

Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/MeasureMethodology.html. 

157Hybrid Hospital-Wide Readmission Measure 

with Electronic Health Record Extracted Risk 

Factors (Version 1.1). Available at: http://

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospitalQualityInits/

Measure-Methodology.html. 

elements using a dataset from an active 

EHR data warehouse of a large 

healthcare system serving over 3.3 

million beneficiaries; 155 (4) tested the 

utility of feasible data elements in riskadjusted hierarchical models of 30-day 

mortality following hospitalization for a 

variety of common and costly medical 

conditions (for example, heart failure, 

pneumonia, and stroke); and (5) tested 

the core clinical data elements as riskadjustment variables in the previously 

adopted Hospital IQR Program measure, 

CMS 30-Day Hospital-Wide All-Cause 

Unplanned Readmission Outcome 

measure (NQF #1789) finalized in the 

FY 2013 IPPS/LTCH PPS final rule (77 

FR 53521 through 53528), creating the 

hybrid hospital-wide readmission 

measure. These steps are discussed in 

more detail below. 

To identify and test the core clinical 

data elements, a TEP was convened. 

TEP members applied feasibility criteria 

to each data type in the Quality Data 

Model (QDM) considering the context of 

adult hospitalized patients only. The 

QDM is an information model that 

provides a standardized description of 

the clinical information captured in 

EHRs, and provides a uniform 

framework to support quality 

measurement that utilizes EHR data. 

TEP members were asked to indicate 

whether at least one data element 

within each data type was: (1) 

Consistently obtained in the target 

population (patients 18 years and older) 

based on current clinical practice; (2) 

captured with a standard definition and 

recorded in a standard format within the 

EHR; and (3) entered in structured fields 

that are feasibly retrieved from current 

EHR systems. 

Next, we conducted a systematic 

review of the literature to identify 

clinical data shown to be predictive of 

mortality and readmission in statistical 

models. A thorough review of studies 

revealed that several categories of 

clinical information from patient 

medical records captured during 

diagnostic assessment and treatment 

were commonly used to predict 

mortality and readmission. These 

included, but were not limited to, basic 

demographic information, laboratory 

test results, and vital sign findings. The 

results are described in the 2013 Core 

Clinical Data Elements Technical Report 

(Version 1.1) and is available on our 

Measure Methodology Web page, under 

the ‘‘Downloads’’ section in Core 

Clinical Data Elements and Hybrid 

Measures zip file found on our Web site 

at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

In order to empirically establish the 

feasibility of potential clinical data 

elements identified by the TEP, we used 

a large multi-site database from a 

healthcare system serving over 3.3 

million beneficiaries. We examined the 

format of the clinical data elements, the 

consistency and timing of capture, and 

the distribution of these extracted 

clinical data values across conditions, 

hospitals, and point of hospital entry. 

From the results of that analysis, we 

identified a list of clinical data elements 

that were consistently captured for more 

than 90 percent of adults admitted for 

common medical conditions. In 

addition, only the first clinical data 

elements captured close to the time a 

patient arrived at the facility were 

considered in order to reflect patients’ 

clinical status when they presented, and 

not the results of treatment received at 

the facility. Analyses showed that vital 

signs (heart rate, systolic blood pressure, 

diastolic blood pressure, respiratory 

rate, temperature, and oxygen 

saturation) were captured within 2 

hours of arrival to the hospital for most 

patients who were subsequently 

admitted to the same facility. In 

addition, analyses showed that weight 

and laboratory tests (hemoglobin, 

hematocrit, platelet, white blood cell 

(WBC) count, potassium, sodium, 

chloride, bicarbonate, blood urea 

nitrogen (BUN), creatinine, glucose, and 

troponin) were captured within 24 

hours of arrival to the hospital for most 

patients who were subsequently 

admitted to the same facility. This was 

true whether patients were first assessed 

in the emergency department, or an 

inpatient unit. From these analyses, we 

specified the units of measurement and 

time window for first captured values 

for each of the 21 feasible and relevant 

core clinical data elements. 

d. Core Clinical Data Elements 

Feasibility Testing Using Readmission 

and Mortality Models 

In order to demonstrate that the core 

clinical data elements improved 

hospital outcome measures, we tested 

them in models of 30-day mortality and 

30-day readmission following 

hospitalization from a variety of 

conditions. The 21 core clinical data 

elements shown in the table above were 

statistically significant predictors in at 

least one measure of 30-day mortality 

after admission for eight common 

medical conditions: AMI; congestive 

heart failure; pneumonia; acute 

cerebrovascular disease; septicemia 

(except during labor); diabetes mellitus 

with complications; coronary 

atherosclerosis; and cardiac 

dysrhythmias.156 All of the core clinical 

data elements listed above were also 

statistically significant predictors of 

readmission in the risk-adjusted models 

of 30-day readmission in a hospitalwide cohort.157 The testing results 

demonstrate that the core clinical data 

elements enhanced the discrimination 

(assessed using the c-statistic) when 

used either in combination with or in 

place of administrative claims data for 

risk adjustment of currently reported 

CMS 30-day mortality and readmission 

outcome measures. For more detailed 

information on testing, we refer readers 

to the methodology reports posted on 

our Measure Methodology Web page, 

under the ‘‘Downloads’’ section in Core 

Clinical Data Elements and Hybrid 

Measures zip file, found on our Web site 

at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/

Measure-Methodology.html. 

e. Use of Core Clinical Data Elements in 

Hospital Quality Measures for the 

Hospital IQR Program 

In the future, we are considering 

requiring hospitals to electronically 

submit core clinical data elements in 

several contexts. One use considered 

would be to risk-adjust claims-based 

hybrid quality measures similar to what 

is described in our discussion above. In 

addition, we are also considering using 

core clinical data elements for quality 

measures that apply more generally to 

an all-payer population (that is, a 

population greater than or equal to 18 

years of age). As we learn more about 

this method of data collection, we will 

be able to give more information. As it 

stands, we envision that use of core 

clinical data elements for an all payer 

population would not be limited to 

merely risk-adjustment or in claimsbased hybrid measures. However, 

should we require reporting of core 

clinical data elements, it would be in 

the context of specific measures 

proposed through rulemaking for the 

Hospital IQR Program and potentially 


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158Health Level 7 International. Product Brief. 

Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=379. 

159Health Level 7 International. Product Brief. 

Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=35. 

160Health IT.gov. Certification Programs and 

Policy. Available at: http://healthit.gov/policyresearchers-implementers/about-onc-hitcertification-program. 

other CMS quality programs. Specific 

electronically submitted core clinical 

data elements required would depend 

on the individual measure adopted. 

For claims-based hybrid measures, 

linking variables would be required to 

ensure that the datasets containing 

administrative claims data are correctly 

linked with EHR datasets containing the 

core clinical data elements for proper 

risk adjustment. The linkage variables 

would come from an additional 

requirement for hospitals to submit 

these variables. Such linkage variables, 

for example, might include admission 

and discharge dates, CMS certification 

number, and date of birth. Some of these 

linkage variables are already routinely 

collected by EHRs; however, actual 

linkage variables required for a specific 

hybrid measure would depend on 

empirical testing of approaches to 

linkage for individual measure cohorts. 

f. Content Exchange Standard 

Considerations for Core Clinical Data 

Elements 

Data can be collected in EHRs and 

health information technology (IT) 

systems using standardized formats to 

promote consistent representation and 

interpretation, as well as to allow for 

systems to compute data without 

needing human interpretation. These 

standards are referred to as content 

exchange standards, because the 

standard details how data should be 

represented and the relationships 

between data elements. This allows the 

data to be exchanged across EHRs and 

health IT systems while retaining their 

meaning. Commonly used content 

exchange standards include the 

Consolidated Clinical Data Architecture 

(C–CDA) and the Quality Reporting Data 

Architecture (QRDA). The C–CDA 

standard is frequently used for the 

representation of summary care records 

and provides a format for electronically 

representing data within document 

templates and sections.158 The QRDA 

standard provides a document format 

and standard structure to electronically 

report quality measure data.159 QRDA 

allows for the use of CDA templates (the 

same underlying standard used in C– 

CDA) to represent quality measures 

using the QDM information model 

described above. Thus, QRDA could be 

considered a related standard to C–CDA 

for the specific quality reporting use 

case. 

The core clinical data elements we are 

considering could be electronically 

reported to CMS formatted according to 

either the C–CDA or QRDA standard to 

promote consistent representation and 

more efficient calculation of hybrid 

measure results. These standards are 

also currently required for participation 

in the Medicare and Medicaid EHR 

Incentive Programs. Sections 1886(n) 

and 1814(l) of the Act, as added by the 

HITECH Act, authorize incentive 

payments under Medicare for eligible 

hospitals and critical access hospitals 

that successfully demonstrate the 

meaningful use of Certified EHR 

Technology (CEHRT). Section 

1903(t)(6)(C) of the Act also requires 

that Medicaid providers adopt, 

implement, upgrade, or meaningfully 

use CEHRT if they are to receive 

incentives. We refer readers to the 

CEHRT definition adopted by the Office 

of the National Coordinator for Health 

IT (ONC) in its 2014 Edition standards 

and certification criteria final rule (77 

FR 53972). ONC’s CEHRT definition is 

adopted in § 170.102 and includes the 

capabilities defined for the Base EHR, 

including certification to create 

transitions of care documents using the 

C–CDA standard and to successfully 

report clinical quality measures using 

the QRDA standard (we refer readers to 

Table 6 of the ONC 2014 Edition 

standards and certification criteria final 

rule at 77 FR 54265). 

We are specifically considering the 

use of QRDA Category I (QRDA–I) as the 

transmission standard for core clinical 

data elements to CMS, because the core 

clinical data elements specified for risk 

adjustment need to be captured in 

relation to the start of an inpatient 

encounter, to be certain the data has 

been appropriately connected to the 

encounter. The QRDA–I standard 

enables an individual patient-level 

quality report that contains quality data 

for one patient for one or more quality 

measures. For further detail on QRDA– 

I, the most recently available QRDA–I 

specifications can be found at: http://

www.hl7.org/implement/standards/

product_brief.cfm?product_id=35. 

Regardless of whether C–CDA or 

QRDA–I was used for the reporting of 

core clinical data elements, we note that 

these data exchange standards would 

enhance alignment across CMS 

programs, as well as reduce EHR 

developer and provider burden by 

adopting standards that are already in 

place for the exchange of electronically 

specified clinical and quality data. 

As part of this comment solicitation, 

we are inviting comment on whether 

EHR technology should be required to 

be certified under the ONC Health IT 

Certification Program 160 for the 

submission of the core clinical data 

elements for participation in the 

Hospital IQR Program using the most 

appropriate content exchange standard 

(such as, and not limited to, QRDA–1 or 

C–CDA). We believe that certification 

could test and certify that EHR 

technology can properly collect the core 

clinical data elements formatted to the 

appropriate content exchange standard 

(such as, and not limited to QRDA–1 or 

C–CDA), promoting more standardized 

and consistently represented data that 

can be submitted to CMS to risk-adjust 

hybrid measures. 

In summary, we are seeking public 

comment on the concept of collecting 

core clinical data elements, and in 

particular, we are interested in feedback 

specifically regarding: (1) The use of the 

core clinical data elements derived from 

EHRs for use in risk adjustment of 

outcome measures as well as other types 

of measures; (2) the collection of 

additional administrative linkage 

variables to link a patient’s episode of 

care from EHR data with his/her 

administrative claim data; and (3) the 

use of content exchange standards for 

reporting these data elements. Regarding 

the use of content exchange standards, 

we welcome input on the benefits and 

implementation considerations if CMS 

were to require QRDA–I, as well as the 

tradeoffs to requiring QRDA–I instead of 

C–CDA or other content exchange 

standards. 

10. Form, Manner, and Timing of 

Quality Data Submission 

a. Background 

Sections 1886(b)(3)(B)(viii)(I) and (II) 

of the Act state that the applicable 

percentage increase for FY 2015 and 

each subsequent year shall be reduced 

by one-quarter of such applicable 

percentage increase (determined 

without regard to sections 

1886(b)(3)(B)(ix), (xi), or (xii) of the Act) 

for any subsection (d) hospital that does 

not submit data required to be 

submitted on measures specified by the 

Secretary in a form and manner, and at 

a time, specified by the Secretary. 

Previously, the applicable percentage 

increase for FY 2007 and each 

subsequent fiscal year until FY 2015 

was reduced by 2.0 percentage points 

for subsection (d) hospitals failing to 

submit data in accordance with the 

description above. We note that, in 

accordance with the statute, the FY 

2015 payment determination begins the 


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161Meaningful Use in 2014. Retrieved from: 

http://www.cms.gov/Regulations-and-Guidance/

Legislation/EHRIncentivePrograms/

EducationalMaterials.html. 

162 eCQI Resource Center: Advance Notice of 

Proposed Changes for the 2015 eCQM Annual 

Update; Pre-release 2015 Annual Update 

specifications available in HQMF R2.1 format. 

Available at: http://www.healthit.gov/ecqi-resourcecenter/. 

first year that the Hospital IQR Program 

will reduce the applicable percentage 

increase by one-quarter of such 

applicable percentage increase. 

In order to participate in the Hospital 

IQR Program, hospitals must meet 

specific procedural, data collection, 

submission, and validation 

requirements. For each Hospital IQR 

Program year, we require that hospitals 

submit data on each measure in 

accordance with the measure’s 

specifications for a particular period of 

time. The data submission 

requirements, Specifications Manual, 

and submission deadlines are posted on 

the QualityNet Web site at: http://

www.QualityNet.org/. Hospitals must 

register and submit quality data through 

the secure portion of the QualityNet 

Web site. There are safeguards in place 

in accordance with the HIPAA Security 

Rule to protect patient information 

submitted through this Web site. 

b. Procedural Requirements for the FY 

2018 Payment Determination and 

Subsequent Years 

The Hospital IQR Program procedural 

requirements are codified in regulation 

at 42 CFR 412.140. We refer readers to 

the codified regulations for participation 

requirements, as further explained by 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50810 through 50811). We are 

not proposing any changes to the 

procedural requirements. 

c. Data Submission Requirements for 

Chart-Abstracted Measures 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51640 

through 51641), the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53536 through 

53537), and the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50811) for details 

on the Hospital IQR Program data 

submission requirements for chartabstracted measures. 

d. Alignment of the Medicare EHR 

Incentive Program Reporting for Eligible 

Hospitals and CAHs With the Hospital 

IQR Program 

(1) Background 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50256 

through 50259) for our policies to align 

electronic clinical quality measures data 

reporting and submission periods on a 

calendar year basis for the FY 2017 

payment determination for both the 

Medicare EHR Incentive Program for 

eligible hospitals and CAHs, and the 

Hospital IQR Program. In this proposed 

rule, we are proposing to: (1) Continue 

to require Certified Electronic Health 

Record Technology (CEHRT) 2014 

Edition and (2) update reporting periods 

and submission deadlines, for the FY 

2018 payment determination for the 

Hospital IQR Program. 

(2) Proposed Electronic Clinical Quality 

Measure Certification for the FY 2018 

Payment Determination 

As described in the FY 2015 IPPS/

LTCH PPS final rule (79 FR 50251), for 

the Hospital IQR Program, hospitals that 

submit electronic clinical quality 

measures data for the FY 2017 payment 

determination are required to submit 

data using CEHRT 2014 Edition, which 

is an Electronic Health Record 

certification. Although we required 

CEHRT, eligible hospitals were not 

required to ensure that their CEHRT 

products were recertified to the most 

recent version of the electronic 

specifications for the clinical quality 

measures. We also stated in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

50251), that for the FY 2017 payment 

determination, a hospital could submit 

electronic clinical quality measures for 

the Hospital IQR Program during CY 

2015 even if they attest their aggregate 

measure numerators and denominators 

through the Medicare EHR Incentive 

Program. The hospital could submit as 

test data or production data. Test data 

submissions are submissions that do not 

count as submissions; they are practice 

submissions. Production data 

submissions are considered final 

submissions meant to fulfill Hospital 

IQR Program submission requirements. 

We are proposing to continue the 

requirement for hospitals to use CEHRT 

2014 Edition 161 when submitting 

electronic clinical quality measures for 

the CY 2016/FY 2018 payment 

determination. We note that the Office 

of the National Coordinator for Health 

Information Technology (ONC) has 

proposed a new Edition of EHR 

technology which may be available for 

some providers as early as 2016 in its 

‘‘2015 Edition Health Information 

Technology (Health IT) Certification 

Criteria, 2015 Edition Base Electronic 

Health Record (EHR) Definition, and 

ONC Health IT Certification Program 

Modifications’’ (hereafter known as the 

‘‘2015 Edition proposed rule’’) (80 FR 

16804 through 16921). However, we 

will require hospitals to continue to 

submit data for Hospital IQR Program 

purposes using the 2014 Edition for the 

FY 2018 payment determination. Any 

changes for the Hospital IQR Program 

because of ONC’s update will be 

proposed in future rule making. 

We are inviting public comments on 

this proposal. 

(3) Proposed Reporting Periods and 

Electronic Submission Deadlines for the 

FY 2018 Payment Determination 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50256 through 50259), we 

finalized our policy that hospitals could 

voluntarily submit electronic clinical 

quality measure data for one calendar 

year (CY) quarter’s data for either CY Q1 

(January 1–March 31, 2015), CY Q2 

(April 1–June 30, 2015), or CY Q3 (July 

1–September 30) by November 30, 2015. 

In this proposed rule, for the FY 2018 

payment determination, we are 

proposing changes to both the reporting 

periods and the submission deadlines. 

For the FY 2018 payment 

determination, we are proposing that 

hospitals must submit both Q3 and Q4 

of 2016 data for 16 measures reported as 

electronic clinical quality measures. We 

also are proposing that for the FY 2018 

payment determination, hospitals must 

submit the electronic clinical quality 

measure data for these two quarters (Q3 

and Q4 of 2016) within 2 months after 

the end of the applicable calendar year 

quarter. For CY 2016, these deadlines 

would be November 30, 2016 for Q3 and 

February 28, 2017 for Q4. We refer 

readers to the table entitled ‘‘Proposed 

CY 2016/FY 2018 Payment 

Determination Hospital IQR Program 

Electronic Reporting Periods and 

Submission Deadlines for Eligible 

Hospitals,’’ below. 

As part of our measure maintenance 

process, each year we make updates to 

the electronic specifications of the 

Clinical Quality Measures approved for 

submission in CMS programs. These 

annual updates are found on our Web 

site at: http://www.cms.gov/RegulationsandGuidance/Legislation/

EHRIncentivePrograms/eCQM_

Library.html. In developing these 

reporting periods and submission 

timelines, we considered hospitals’ and 

vendors’ ability to report electronic 

clinical quality measures and the 

burden associated with implementing 

the 2015 annual update. The May 2015 

annual update of electronic clinical 

quality measure specifications will 

include changes to the Quality Data 

Model (QDM) and the Health Quality 

Measure Format (HQMF),162 and we 

recognize that hospitals may require 

additional time to implement the 

associated software changes. Because of 


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this, we are proposing that hospitals 

must adopt the most recent annual 

update prior to data submission. For 

example, for the CY 2016/FY 2018 

payment determination, hospitals 

would need to submit electronic clinical 

quality measure using the 2015 Annual 

Update. As a result and as stated above, 

we are proposing to delay the required 

reporting of electronic clinical quality 

measures to begin with Q3 of 2016, with 

a reporting deadline of November 30, 

2016. The table below shows the 

required electronic clinical quality 

measure reporting periods and 

submission deadlines for CY 2016. 

PROPOSED CY 2016/FY 2018 PAYMENT DETERMINATION HOSPITAL

IQR PROGRAM ELECTRONIC REPORTING PERIODS AND SUBMISSION

DEADLINES FOR ELIGIBLE HOSPITALS

Discharge reporting 

periods Submission deadline 

January 1, 2016– 

March 31, 2016.

N/A. 

April 1, 2016–June 

30, 2016.

N/A. 

July 1, 2016–September 30, 2016.November 30, 2016. 

October 1, 2016–December 31, 2016.February 28, 2017. 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50319 

through 50321) for a detailed discussion 

of the final policy in the Medicare EHR 

Incentive Program for eligible hospitals 

and CAHs as well as section VIII.D. of 

the preamble of this proposed rule 

where the EHR Incentive Program 

discusses its proposals to further align 

with the Hospital IQR Program. 

We are inviting public comments on 

our proposals to continue the CEHRT 

2014 Edition requirement and update 

our electronic clinical quality measure 

data reporting and submission periods 

for the FY 2018 payment determination. 

e. Sampling and Case Thresholds for the 

FY 2018 Payment Determination and 

Subsequent Years 

We refer readers to the FY 2011 IPPS/ 

LTCH PPS final rule (75 FR 50221), the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51641), the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53537), and the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50819) for details on our sampling and 

case thresholds for the FY 2016 

payment determination and subsequent 

years. We are making one proposal 

regarding our population and sampling 

policy. However, we are not proposing 

any changes to case thresholds. 

Currently, hospitals must submit to 

CMS quarterly aggregate population and 

sample size counts for Medicare and 

nonMedicare discharges for all 

measures in the topic areas for which 

chart-abstracted data must be submitted. 

Hospitals are required to submit their 

aggregate population and sample size 

count for each topic area. In accordance 

with the policy we first adopted in the 

FY 2011 IPPS/LTCH PPS final rule (75 

FR 50221), hospitals that have not 

treated patients in a specific topic area 

must still submit quarterly population 

and sample size counts for all Hospital 

IQR Program chart-abstracted data 

topics. For example, if a hospital has not 

treated AMI patients, the hospital is still 

required to submit a zero for its 

quarterly aggregate population and 

sample count for that topic in order to 

meet the requirement. 

In this proposed rule, we are 

proposing to revise this policy so that, 

beginning with the FY 2018 payment 

determination and subsequent years, 

hospitals will be required to submit 

population and sample size data only 

for those measures that a hospital 

submits as chart-abstracted measures 

under the Hospital IQR Program. This 

differs from the current policy in that 

there may be instances where a hospital 

chooses to electronically submit a 

measure that can be submitted either via 

chart-abstraction or as an electronic 

clinical quality measure and under the 

proposed policy, we would not require 

population and sample size data in this 

case. Under the proposed policy, if a 

hospital submits a measure as an 

electronic clinical quality measure, or if 

a measure becomes voluntary or 

suspended, the population and sample 

data would not be required. 

We are inviting public comments on 

this proposal. 

f. HCAHPS Requirements for the FY 

2018 Payment Determination and 

Subsequent Years 

We refer readers to the FY 2011 IPPS/ 

LTCH PPS final rule (75 FR 50220), the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51641 through 51643), the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53537 

through 53538), and the FY 2014 IPPS/ 

LTCH PPS final rule (78 FR 50819 

through 50820) for details on HCAHPS 

requirements. We are not proposing any 

changes to HCAHPS requirements. 

Hospitals and HCAHPS survey 

vendors should check the official 

HCAHPS Web site at http://

www.hcahpsonline.org for new 

information and program updates 

regarding the HCAHPS Survey, its 

administration, oversight and data 

adjustments. 

g. Data Submission Requirements for 

Structural Measures for the FY 2018 

Payment Determination and Subsequent 

Years 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51643 

through 51644) and the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53538 

through 53539) for details on the data 

submission requirements for structural 

measures. We are not proposing any 

changes to data submission 

requirements for structural measures. 

h. Data Submission and Reporting 

Requirements for Healthcare-Associated 

Infection (HAI) Measures Reported via 

NHSN 

For details on the data submission 

and reporting requirements for 

healthcare-associated infection (HAI) 

measures reported via the CDC’s 

National Healthcare Safety Network 

(NHSN) Web site, we refer readers to the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51629 through 51633; 51644 through 

51645), the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53539), and the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50821 through 50822). Clarifications to 

the HAI data reporting and submission 

requirements policy can also be found 

in the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50259 through 50262). The 

data submission deadlines are posted on 

the QualityNet Web site at: http://

www.QualityNet.org/. In this proposed 

rule, we are not proposing any changes 

to data submission and reporting 

requirements for HAI measures reported 

via the NHSN. 

11. Proposed Modifications to the 

Existing Processes for Validation of 

Hospital IQR Program Data 

a. Background 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53539 through 53553), we 

finalized the processes and procedures 

for validation of chart-abstracted 

measures in the Hospital IQR Program 

for the FY 2015 payment determination 

and subsequent years; the FY 2013 

IPPS/LTCH PPS final rule also contains 

a comprehensive summary of all 

procedures finalized in previous years 

and still in effect. Several modifications 

to these processes were finalized for the 

FY 2016 and FY 2017 payment 

determinations in the FY 2014 IPPS/

LTCH PPS final rule (78 FR 50822 

through 50835). 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50262 through 50273) for 

the FY 2017 payment determination and 

subsequent years, we finalized 

additional modifications to these 

processes. These changes fall into the 


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following categories: (a) Eligibility 

criteria for hospitals selected for 

validation; (b) number of charts to be 

submitted per hospital for validation; (c) 

combining scores for HAI and clinical 

process of care measures; (d) processes 

to submit patient medical records for 

chart-abstracted measures; and (e) plans 

to validate electronic clinical quality 

measure data. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50269 through 50273), we 

finalized a policy to conduct a 

validation pilot test for electronic 

clinical quality measures. We stated that 

we intended to complete pilot activities 

in CY 2015 (79 FR 50271) and that 

continues to be our intention. We are 

not proposing any changes to our 

validation pilot test. 

However, in this proposed rule, we 

are proposing modifications to existing 

processes for validation of chartabstracted measures, specifically for the 

Influenza Immunization (NQF #1659) 

measure. 

b. Proposed Modifications to the 

Existing Processes for Validation of 

Chart-Abstracted Hospital IQR Program 

Data 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50265 through 50273), we 

finalized a validation process, which 

included a separate validation stratum 

for the Influenza Immunization (NQF 

#1659) measure (the immunization 

measure validation stratum) because 

that measure overlapped with the 

Hospital VBP Program. The finalized 

validation process for chart-abstracted 

measures included three separate 

validation strata: HAI, Immunization, 

and Other/Clinical Process of Care (79 

FR 50265 through 50273). The 

Immunization stratum includes only 

one measure, Immunization for 

Influenza (NQF #1659). This 

Immunization measure was included in 

its own stratum because it is used in the 

Hospital VBP Program and we wanted 

to ensure that every hospital selected for 

validation would be validated in this 

topic area. 

As discussed in section IV.F.2.b.(1) of 

the preamble of this proposed rule, we 

are proposing to remove the IMM–2 

Influenza Immunization measure from 

the Hospital VBP Program. Given this 

proposed removal of the Influenza 

Immunization measure from the 

Hospital VBP Program, it is no longer 

necessary to ensure validation of this 

topic area by including a separate 

stratum for the Influenza measure. As a 

result, in this proposed rule, for the 

Hospital IQR Program beginning with 

the FY 2018 payment determination and 

for subsequent years, we are proposing 

to remove the separate immunization 

validation stratum and include the 

Influenza Immunization measure in the 

clinical process of care measure 

validation stratum. Under this proposal, 

we would continue to apply our chartabstracted measure validation processes 

only to those chart-abstracted measures 

that are required under the Hospital IQR 

Program in a chart-abstracted form (as 

opposed to those measures that a 

hospital reports as electronic clinical 

quality measures, for example). This 

proposal is consistent with our 

proposed policy to require population 

and sample size data only for those 

measures that are required under the 

Hospital IQR Program. We refer readers 

to section VIII.A.10.e. of the preamble of 

this proposed rule for more detail on 

that proposal. 

We note that although this proposal 

includes an adjustment to the 

composition of the clinical process of 

care validation stratum, we are not 

proposing any changes to the overall 

validation sample size. Under the 

existing validation process, a total of 

eight charts are drawn for validation— 

five of which are drawn from the 

clinical process of care measures 

stratum and three of which are drawn 

from the immunization measure 

stratum. Under this proposal, however, 

while the total number of charts drawn 

is the same (eight), all eight measures 

will be drawn from the clinical process 

of care measure stratum, which would 

then include the Influenza 

Immunization measure. Accordingly, 

one sample of charts will be drawn from 

the clinical process of care measures. 

The proposed removal of the 

immunization validation stratum and 

inclusion of the Influenza Immunization 

measure in the clinical process of care 

validation stratum would result in an 

expanded pool of clinical process of 

care topic areas sampled for validation 

to include STK, VTE, ED, Sepsis, and 

Immunization. As described in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50266), all chart-abstracted measure 

topic areas included in the Hospital IQR 

Program, with the exception of the 

Perinatal Care topic area, are 

automatically included in the validation 

process. We do not include this topic 

area because the Elective Delivery PC– 

01 (NQF #0469) measure is reported in 

aggregate form, which is not consistent 

with our patient-level validation process 

(79 FR 50266). 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50268 through 50269), we 

outlined the weighting of each of three 

validation topic areas: Healthcareassociated infection (66.7 percent); 

Immunization (22.2 percent); and Other/ 

Clinical Process of Care (11.1 percent). 

The table below shows the proposed 

effect on topic area weighting of our 

proposal to remove the immunization 

measure validation stratum and to move 

the Influenza Immunization (NQF 

#1659) measure to the clinical process 

of care validation stratum. 

PROPOSED TOPIC AREA WEIGHTING

FOR VALIDATION FOR THE FY 2018 

PAYMENT DETERMINATION AND SUBSEQUENT YEARS

Topic area Weight 

(percent) 

Healthcare-associated infection 

(HAI) ...................................... 66.7 

Other/Clinical Process of Care 33.3 

Total ................................... 100.0 

We are inviting public comments on 

our proposal to remove the 

immunization measure validation 

stratum, to move the Influenza 

Immunization (NQF #1659) measure to 

the clinical process of care validation 

stratum, and to reweight the topic areas 

for validation beginning with the FY 

2018 payment determination and for 

subsequent years. 

12. Data Accuracy and Completeness 

Acknowledgement Requirements for the 

FY 2018 Payment Determination and 

Subsequent Years 

We refer readers to the FY 2013 IPPS/ 

LTCH PPS final rule (77 FR 53554) for 

details on Data Accuracy and 

Completeness Acknowledgement 

(DACA) requirements. We are not 

proposing any changes to the DACA 

requirements. 

13. Public Display Requirements for the 

FY 2018 Payment Determination and 

Subsequent Years 

We refer readers to the FY 2008 IPPS 

final rule (72 FR 47364), the FY 2011 

IPPS/LTCH PPS final rule (75 FR 

50230), the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51650), the FY 2013 

IPPS/LTCH PPS final rule (77 FR 

53554), and the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50836) for details 

on public display requirements. The 

Hospital IQR Program quality measures 

are typically reported on the Hospital 

Compare Web site at: http://

www.medicare.gov/hospitalcompare, 

but on occasion are reported on other 

CMS Web sites such as http://

www.cms.gov and/or https://

data.medicare.gov. 

We note that for the Mortality, 

Readmission, Complication, Payment 

and AHRQ measures, we will continue 

to replace publically reported data with 


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a footnote for hospitals that do not have 

data for at least 25 cases combined 

during the reporting period. If there are 

fewer than 25 eligible cases, the 

measures are assigned to a separate 

category described as ‘‘The number of 

cases is too small (fewer than 25) to 

reliably tell how well the hospital is 

performing.’’ The measures are included 

in the calculation but are not publicly 

reported on Hospital Compare. For 

chart-abstracted or Web-based measures, 

if either the numerator or the 

denominator is greater than 0 and less 

than 11, the data are not reported on 

Hospital Compare, but rather data is 

displayed as ‘‘Not Available’’. This 

guidance does not apply to calculated 

measures, only to those in which cases/ 

patients could be identified. We also 

provide footnote explanations on the 

Hospital Compare Web site at: http://

www.medicare.gov/hospitalcompare/

Data/Footnotes.html. 

We refer readers to section VIII.A.8.b. 

of the preamble of this proposed rule, 

where we are proposing to delay 

publicly reporting electronic clinical 

quality measure data submitted by 

hospitals for CY 2016/FY 2018 payment 

determination in order to allow time for 

us to evaluate the effectiveness of 

electronically reported clinical quality 

measure data. In the meantime, 

measures reported via electronic clinical 

quality measures will be marked with a 

footnote on Hospital Compare noting 

that: (1) The hospital submitted data via 

EHR; (2) data are being processed and 

analyzed; and (3) we will eventually 

publicly report this data once we 

determine the data to be reliable and 

accurate. 

We are inviting public comments on 

our proposal. 

14. Reconsideration and Appeal 

Procedures for the FY 2018 Payment 

Determination and Subsequent Years 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51650 

through 51651), the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50836), and at 42 

CFR 412.140(e) for details on 

reconsideration and appeal procedures 

for the FY 2017 payment determination 

and subsequent years. We are not 

proposing any changes to the 

reconsideration and appeals procedures. 

15. Hospital IQR Program Extraordinary 

Circumstances Extensions or 

Exemptions 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS final rule (76 FR 51651 

through 51652), the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50836 through 

50837), and 42 CFR 412.140(c)(2) for 

details on the Hospital IQR Program 

extraordinary circumstances extensions 

or exemptions policy. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50277), we noted that we 

will refer to the process as the 

Extraordinary Circumstances Extensions 

or Exemptions process and, accordingly, 

finalized changes reflecting this updated 

language in the corresponding 

regulation text. We are not proposing 

any changes to the Hospital IQR 

Program’s extraordinary circumstances 

extensions or exemptions policy. 

B. PPS-Exempt Cancer Hospital Quality 

Reporting (PCHQR) Program 

1. Statutory Authority 

Section 3005 of the Affordable Care 

Act added new sections 1866(a)(1)(W) 

and (k) to the Act. Section 1866(k) of the 

Act establishes a quality reporting 

program for hospitals described in 

section 1886(d)(1)(B)(v) of the Act 

(referred to as ‘‘PPS-Exempt Cancer 

Hospitals’’ or ‘‘PCHs’’) that specifically 

applies to PCHs that meet the 

requirements under 42 CFR 412.23(f). 

Section 1866(k)(1) of the Act states that, 

for FY 2014 and each subsequent fiscal 

year, a PCH must submit data to the 

Secretary in accordance with section 

1866(k)(2) of the Act with respect to 

such a fiscal year. For additional 

background information, including 

previously finalized measures and other 

policies for the PCHQR Program, we 

refer readers to the following final rules: 

The FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50277 through 50288); the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50838 through 50846); and the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53556 

through 53561). 

2. Proposed Removal of Six Surgical 

Care Improvement Project (SCIP) 

Measures From the PCHQR Program 

Beginning With Fourth Quarter (Q4) 

2015 Discharges and for Subsequent 

Years 

We are proposing to remove six SCIP 

measures from the PCHQR Program 

beginning with fourth quarter (Q4) 2015 

discharges and for subsequent years. 

Under this proposal, PCHs will meet 

reporting requirements for the FY 2016 

and FY 2017 programs by submitting 

first quarter (Q1) through third quarter 

(Q3) 2015 data for these measures: 

• Surgery Patients Who Received 

Appropriate Venous 

Thromboembolism Prophylaxis 

within 24 Hours Prior to Surgery to 24 

Hours After Surgery (NQF #0218) 

• Urinary Catheter Removed on PostOperative Day One (POD1) or PostOperative Day Two (POD2) with Day 

of Surgery Being Day Zero (NQF 

#0453) 

• Prophylactic Antibiotic Received 

Within One Hour Prior to Surgical 

Incision (NQF #0527) 

• Prophylactic Antibiotic Selection for 

Surgical Patients (NQF #0528) 

• Prophylactic Antibiotic Discontinued 

Within 24 Hours After Surgery End 

Time (NQF #0529) 

• Surgery Patients on Beta-Blocker 

Therapy Prior to Admission who 

Received a Beta-Blocker During the 

Perioperative Period (NQF #0284) 

We first adopted the six SCIP 

measures in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50840 through 

50841) and refer readers to that rule for 

a detailed discussion of the measures. 

As described in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50205), these 

measures have been determined to be 

topped-out in the Hospital IQR Program 

and were removed from that program. 

To meet FY 2016 and FY 2017 program 

requirements, we are proposing that 

PCHs would continue to submit these 

six measures for first quarter (Q1) 2015 

through third quarter (Q3) 2015 

discharges in accordance with the 

submission timeline we finalized in the 

FY 2015 IPPS/LTCH PPS final rule (79 

FR 50285). We are proposing to remove 

these measures from the PCHQR 

Program because we have removed them 

from the Hospital IQR Program and, 

because they have been removed from 

that program, it is no longer 

operationally feasible to collect these 

measures under the PCHQR Program. By 

removing these measures, we also 

would alleviate the maintenance costs 

and administrative burden for PCHs 

associated with reporting them (79 FR 

50205). 

We are inviting public comments on 

these proposals. 

3. Proposed New Quality Measures 

Beginning With the FY 2018 Program 

a. Considerations in the Selection of 

Quality Measures 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53556), the FY 2014 IPPS/ 

LTCH PPS final rule (78 FR 50837 

through 50838), and the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50278), we 

indicated that we have taken a number 

of principles into consideration when 

developing and selecting measures for 

the PCHQR Program, and that many of 

these principles are modeled on those 

we use for measure development and 

selection under the Hospital IQR 

Program. In this proposed rule, we are 

not proposing any changes to the 

principles we consider when 


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163Measure Applications Partnership: List of 

Measures Under Consideration (MUC) for December 

1, 2014. Available at: http://www.qualityforum.org/ 

WorkArea/

linkit.aspx?LinkIdentifier=id&ItemID=78318. 

164National Quality Forum ‘‘Process and 

Approach for MAP Pre-Rulemaking Deliberations 

2015’’ Available at: http://www.qualityforum.org/

Publications/2015/01/Process_and_Approach_for_

MAP_Pre-Rulemaking_Deliberations_2015.aspx; 

and ‘‘Spreadsheet of MAP 2015 Final 

Recommendations’’ Available at: http://

www.qualityforum.org/map/. 

165CDC. Surveillance for C. difficile, MRSA, and 

other Drug-resistant Infections. Available at: 

http://www.cdc.gov/nhsn/acute-care-hospital/cdiffmrsa/index.html. 

166CDC. Surveillance for Healthcare Personnel 

Vaccination. Available at: http://www.cdc.gov/

nhsn/acute-care-hospital/hcp-vaccination/

index.html. 

167HHS National Action Plan to Prevent Health 

Care-Associated Infections: Road Map to 

Elimination. Available at: http://www.health.gov/

hai/prevent_hai.asp#hai. 

168HHS National Action Plan to Prevent Health 

Care-Associated Infections: Road Map to 

Elimination. Available at: http://www.health.gov/

hai/prevent_hai.asp#hai. 

169CMS Innovation Center Partnership for 

Patients. Available at: http://innovation.cms.gov/

initiatives/partnership-for-patients/. 

170HHS National Action Plan to Prevent Health 

Care-Associated Infections: Road Map to 

Elimination. Available at: http://www.health.gov/

hai/prevent_hai.asp#hai. 

171CDC C. difficile FAQ. Available at: http:// 

www.cdc.gov/HAI/organisms/cdiff/Cdiff_infect.

html. 

172FY 2012 IPPS/LTCH PPS final rule (76 FR 

51630 through 51631). 

173CDC Vital Signs. Available at: http:// 

www.cdc.gov/vitalsigns/pdf/2012-03-vitalsigns.pdf. 

174FY 2012 IPPS/LTCH PPS final rule (76 FR 

51630 through 51631). 

175NQF QPS. Available at: http:// 

www.qualityforum.org/Qps/MeasureDetails.

aspx?standardID=1717&print=0&entityTypeID=1. 

176NQF QPS. Available at: http:// 

www.qualityforum.org/Publications/2013/02/

Patient_Safety_Measures_Complications_-_Phase_

2.aspx. 

177FY 2012 IPPS/LTCH PPS final rule (76 FR 

51630 through 51631). 

178HHS National Action Plan to Prevent Health 

Care-Associated Infections: Road Map to 

Elimination: Proposed Targets. Available at: 

http://www.health.gov/hai/pdfs/HAI-Targets.pdf. 

179 Ibid. 

developing and selecting measures for 

the PCHQR Program. 

b. Summary of Proposed New Measures 

For the FY 2018 PCHQR Program, we 

are proposing to adopt three new quality 

measures. These measures meet the 

requirement under section 1866(k)(3)(A) 

of the Act that measures specified for 

the PCHQR Program be endorsed by the 

entity with a contract under section 

1890(a) of the Act (currently the NQF). 

The proposed measures are as 

follows: 

• Centers for Disease Control and 

Prevention (CDC) National Healthcare 

Safety Network (NHSN) Facility-Wide 

Inpatient Hospital-Onset Clostridium 

difficile Infection (CDI) Outcome 

Measure (NQF #1717) (CDC NHSN 

CDI Measure) 

• CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Methicillin-Resistant 

Staphylococcus aureus (MRSA) 

Bacteremia Outcome Measure (NQF 

#1716) (CDC NHSN MRSA Measure) 

• CDC NHSN Influenza Vaccination 

Coverage Among Healthcare 

Personnel (HCP) Measure (NQF 

#0431) (CDC NHSN HCP Measure) 

The proposed measures were 

included on a publicly available 

document entitled ‘‘List of Measures 

Under Consideration (MUC) for 

December 1, 2014,’’ 163 which is a list of 

quality and efficiency measures being 

considered for use in various Medicare 

programs. The proposed measures were 

also submitted to the Measure 

Applications Partnership (MAP), a 

public-private partnership convened by 

the NQF for the purpose of providing 

input to the Secretary on the selection 

of certain quality and efficiency 

measures. For the PCHQR Program, the 

MAP supported the inclusion of all 

three measures. The MAP’s 

recommendations can be found in the 

‘‘Spreadsheet of MAP 2015 Final 

Recommendations.’’ 164

In addition, all three of the proposed 

measures are currently reported under 

the Hospital IQR Program as described 

in the FY 2012 IPPS/LTCH PPS final 

rule (76 FR 51630 through 51631). We 

refer readers to CDC’s Web site for 

detailed measure information for the 

three measures we are proposing.165 166

The sections below outline our rationale 

for proposing to adopt these measures. 

c. CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Clostridium difficile 

Infection (CDI) Outcome Measure (NQF 

#1717) 

Healthcare-associated infections 

(HAIs), such as CDI and MRSA, are a 

significant cause of morbidity and 

mortality. At any given time, 

approximately one in every 25 

inpatients has an infection related to 

hospital care.167 These infections cost 

the U.S. healthcare system billions of 

dollars each year and lead to the loss of 

tens of thousands of lives. In addition, 

HAIs can have devastating emotional, 

financial and medical consequences.168

As a result of these adverse outcomes, 

we are committed to increasing patient 

safety by partnering with hospitals (for 

example, the CMS Partnership for 

Patients) 169 to make hospital care safer, 

more reliable, and less costly by 

preventing injury and increased 

morbidity in patients, as well as 

allowing them to heal without 

complications.170

CDC reports that prolonged antibiotic 

exposure, a long length of stay in a 

healthcare setting, and the existence of 

a serious underlying illness or 

immunocompromised condition (for 

example, cancer) increase the risk of 

CDI.171 As a result, we believe it is 

important to collect data on CDIs in the 

PCH setting, where cancer patients face 

increased exposure to these risk factors. 

Additionally, in recent years, CDIs have 

become more frequent, more severe, and 

more difficult to treat.172 Each year, CDI 

is linked to 14,000 American deaths.173

Infection is especially common in older 

adults, but also affects some otherwise 

healthy people who are not hospitalized 

and/or taking antibiotics.174

This proposed measure addresses the 

National Quality Strategy (NQS) Patient 

Safety domain. The measure reports the 

standardized infection ratio (SIR) of 

hospital-onset CDI Laboratory-identified 

events (LabID events) among all patients 

in the facility. The numerator includes 

the total number of observed hospitalonset CDI LabID events among all 

inpatients in the facility, excluding well 

baby-nurseries and Neonatal Intensive 

Care Units.175 The denominator 

includes the total number of predicted 

hospital-onset CDI LabID events, 

calculated by multiplying the number of 

inpatient days for the facility by the 

hospital-onset CDI LabID event rate for 

similar types of facilities (obtained from 

a standard population).176 177

Beginning with a 2010–2011 baseline 

SIR of 1.0, we set a national goal to 

reduce the incidence of facility-onset 

CDI overall by 30 percent (to a SIR of 

0.70) by no later than 2013. However, 

we were not able to meet that goal, and 

the rate of facility-onset CDI decreased 

by only 2 percent as of 2012 (to a SIR 

of 0.98). Therefore, we believe it is 

critical to continue collecting data on 

CDI in the hospital setting, and to adopt 

this measure for the PCH setting, in 

order to ensure the highest quality of 

care for cancer patients and continue 

our effort to support HHS’ National 

Action Plan to Prevent Healthcare 

Associated Infections (HAIs) and our 

proposed 2020 goal to reduce facilityonset of CDI by 30 percent from the 

2015 baseline.178 The collection and 

evaluation of CDI data will allow PCH 

staff to evaluate whether their infection 

control efforts need improvement. We 

recognize the severe impact of CDI,179

and aim to continue efforts to increase 

patient protection and safety, and at the 

same time prevent adverse infections in 

the PCH setting. 


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180Catherine Liu, Arnold Bayer, et al.: Clinical 

Practice Guidelines by the Infectious Disease 

Society of America for the Treatment of MethicillinResistant Staphylococcus Aureus Infections in 

Adults and Children Infectious Disease Society of 

America 2011; 52:e18. 

181CDC. General Information about MRSA in 

Healthcare Settings: Available at: http:// 

www.cdc.gov/mrsa/healthcare/index.html. 

182NQF QPS. Available at: http:// 

www.qualityforum.org/Qps/MeasureDetails.

aspx?standardID=1716&print=0&entityTypeID=1. 

183 Ibid. 

184FY 2012 IPPS/LTCH PPS final rule (76 FR 

51630). 

185HHS National Action Plan to Prevent Health 

Care-Associated Infections: Road Map to 

Elimination: Proposed Targets. Available at: http:// 

www.health.gov/hai/pdfs/HAI-Targets.pdf. 186CDC. Seasonal Influenza Q&A. Available at: 

http://www.cdc.gov/flu/about/qa/disease.html. 

187CDC. Estimating Seasonal InfluenzaAssociated Deaths in the United States: CDC Study 

Confirms Variability of Flu. Available at: http://

www.cdc.gov/flu/about/disease/us_flu-related_

deaths.html. 

188CDC. ‘‘Prevention and control of seasonal 

influenza with vaccines: Recommendations of the 

Advisory Committee on Immunization Practices 

(ACIP), 2009.’’ MMWR 58, no. Early Release 

(2009):1–52. 

189Salgado CD, Giannetta ET, Hayden FG, Farr 

BM.: Preventing influenza by improving the vaccine 

acceptance rate of clinicians. Infection Control and 

Hospital Epidemiology 2004; 25: 923–928. 

190Potter J, Stott DJ, Roberts MA, et al.: Influenza 

vaccination of health-care workers in long-term-care 

hospitals reduces the mortality of elderly patients. 

Journal of Infectious Diseases 1997; 175:1–6. 

191Hayward AC, Harling R, Wetten S, et al.: 

Effectiveness of an influenza vaccine program for 

care home staff to prevent death, morbidity, and 

health service use among residents: cluster 

randomized controlled trial. British Medical Journal 

2006; 333:1241–1246. 

192Talbot TR, Bradley SF, Cosgrove SE., et al.: 

SHEA position paper: Influenza vaccination of 

healthcare workers and vaccine allocation for 

healthcare workers during vaccine shortages. 

Infection Control and Hospital Epidemiology 2005; 

26:882–890. 

193NQF QPS. Available at: http://

www.qualityforum.org/Qps/0431. 

194 Ibid. 

195 Ibid. 

196FY 2012 IPPS/LTCH PPS final rule (76 FR 

51631). 

By proposing this measure in the 

PCHQR Program, we aim to continue to 

provide a common mechanism (that is, 

reporting to CDC’s NHSN) that all 

hospitals, including PCHs, can use to 

uniformly submit and report measure 

data and inform their clinicians of the 

impact of targeted prevention efforts. 

We are inviting public comments on 

our proposal to add the CDC NHSN CDI 

Outcome Measure to the PCHQR 

Program beginning with the FY 2018 

program. 

d. CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Methicillin-Resistant 

Staphylococcus aureus (MRSA) 

Bacteremia Outcome Measure (NQF 

#1716) 

Invasive MRSA infections may cause 

approximately 18,000 deaths per year 

during a hospital stay.180 Cancer 

patients are at increased risk for MRSA 

infections, specifically older adults with 

weakened immune systems who are 

receiving hospital inpatient care.181 As 

a result, we believe it is important to 

collect data on MRSA in the PCH 

setting. 

This proposed measure addresses the 

NQS Patient Safety domain. This 

measure reports the SIR of hospitalonset unique blood source MRSA LabID 

events among all inpatients in a facility. 

The numerator includes the total 

number of observed hospital-onset 

unique blood source MRSA LabID 

events among all inpatients in the 

facility.182 The denominator includes 

the total number of predicted hospitalonset unique blood source MRSA LabID 

events, calculated by multiplying the 

number of inpatient days for the facility 

by the hospital-onset MRSA bacteremia 

LabID event rate for similar types of 

facilities (obtained from a standard 

population). 183 184

Beginning with a 2009 baseline SIR of 

1.0, we set a national goal to reduce the 

incidence of facility-onset MRSA 

infections by 50 percent by 2020. 

However, by 2012 the rate of facilityonset MRSA infections decreased by 

only 3 percent (to a SIR of 0.97). 

Therefore, we believe it is critical to 

continue collecting data on CDI in the 

hospital setting, and to adopt this 

measure for the PCH setting, to ensure 

the highest quality of care for cancer 

patients and continue our effort to 

support the HHS’ National Action Plan 

and the proposed 2020 goal to reduce 

facility-onset MRSA infections by 50 

percent from the 2015 baseline.185

The collection and evaluation of 

MRSA data will allow PCH staff to 

evaluate whether their infection control 

efforts need improvement. By proposing 

this measure in the PCHQR Program, we 

aim to continue to provide a common 

mechanism (CDC NHSN) for all 

hospitals, including PCHs, to uniformly 

report measure data and inform their 

clinicians of the impact of targeted 

prevention efforts. Furthermore, we 

recognize the severe impact of MRSA 

and aim to continue our efforts to 

increase patient protection and safety, 

while at the same time preventing 

adverse infections in the PCH setting. 

We are inviting public comments on 

our proposal to add the CDC NHSN 

MRSA Measure to the PCHQR Program 

beginning with the FY 2018 program. 

e. CDC NHSN Influenza Vaccination 

Coverage Among Healthcare Personnel 

[HCP] Measure (NQF #0431) (CDC 

NHSN HCP Measure) 

CDC estimates that in the United 

States, each year, on average 5 percent 

to 20 percent of the population gets 

influenza and more than 200,000 people 

are hospitalized from seasonal 

influenza-related complications.186

Influenza seasons are unpredictable and 

can be severe. Over a period of 30 years, 

between 1976 and 2006, estimates of 

influenza-associated deaths per year in 

the United States ranged from a low of 

approximately 3,000 to a high of 

approximately 49,000 people.187

Because influenza can become 

widespread and have serious 

consequences, the Advisory Committee 

on Immunization Practices (ACIP) 

recommends that all health care 

personnel (HCP) and persons in training 

for health care professions be vaccinated 

annually against influenza.188 Persons 

who are infected with the influenza 

virus, including those with subclinical 

infection, can transmit the influenza 

virus to persons at higher risk for 

complications, such as 

immunocompromised cancer patients. 

Additionally, vaccination of HCP has 

been associated with reduced work 

absenteeism and fewer deaths among 

patients. Results of several studies also 

indicate that higher vaccination 

coverage among HCP is associated with 

lower incidence of nosocomial 

influenza.189 190 191 Such findings have 

led researchers to call for mandatory 

influenza vaccination of HCP.192

This proposed measure addresses the 

NQS Patient Safety domain. The 

measure reports the percent of HCP who 

receive the influenza vaccination.193

The numerator includes HCP in the 

denominator population who during the 

time from October 1 (or when the 

vaccine became available) through 

March 31 of the following year, either: 

(a) Received an influenza vaccination 

administered at the facility, or reported 

in writing (paper or electronic) or 

provided documentation that the 

influenza vaccination was received 

elsewhere; (b) were determined to have 

a medical contraindication or history of 

Guillain-Barre ́ Syndrome within 6 

weeks after a previous influenza 

vaccination; (c) declined the influenza 

vaccination; or (d) had an unknown 

vaccination status.194 The denominator 

includes the number of HCP who are 

working in the health care facility for at 

least 1 working day between October 1 

and March 31 of the following year, 

regardless of clinical responsibility or 

patient contact, and includes: (a) 

Employees; (b) licensed independent 

practitioners; and (c) adult students/

trainees and volunteers.195 196


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197Healthy People 2020. Immunization and 

Infectious Diseases. Available at: http://

www.healthypeople.gov/2020/topics-objectives/

topic/immunization-and-infectious-diseases/

objectives. 

198CDC. Influenza Vaccination Information for 

Health Care Workers. Available at: http://

www.cdc.gov/flu/healthcareworkers.html. 

199CDC Preventing Infections in Cancer Patients. 

Available at: http://www.cdc.gov/cancer/flu/ 200Maltezou HC, Drancourt M.: Nosocomial 

influenza in children. Journal of Hospital Infection 

2003; 55:83–91. 201Salgado CD, Farr BM, Hall KK, Hayden FG.: 

Influenza in the acute hospital setting. The Lancet 

Infectious Diseases 2002; 2:145–155. 

202Wilde JA, McMillan JA, Serwint J, Butta J, 

O’Riordan MA, Steinhoff MC.: Effectiveness of 

influenza vaccine in health care professionals: a 

randomized trial. The Journal of the American 

Medical Association 1999; 281:908–913. 

Numerators and denominators are 

collected separately for each of the 

specified groups. 

We believe it is important to collect 

data on this measure in order to ensure 

the highest quality of care for cancer 

patients in our effort to support one of 

the Healthy People 2020 goals of 

immunizing 90 percent of healthcare 

personnel nationally by 2020.197

Overall, final 2013–14 influenza 

vaccination coverage among HCP was 

75.2 percent, similar to coverage of 72.0 

percent in the 2012–13 season.198 We 

aim to increase patient protection and 

safety and at the same time prevent 

adverse outcomes (for example, 

transmitting influenza to patients, 

specifically high risk cancer patients, 

and premature death due to influenza) 

in the PCH setting. 

We believe that this measure is 

applicable to the PCH setting based on 

CDC guidelines that patients who 

currently have cancer or who have had 

certain types of cancer in the past (such 

as lymphoma or leukemia), are at high 

risk for complications from influenza, 

including hospitalization and death.199

The involvement of HCP in influenza 

transmission has been a longstanding 

concern.200 201 Vaccination is an 

effective preventive measure against 

influenza, and can prevent many 

illnesses, deaths, and losses in 

productivity.202

By proposing this measure in the 

PCHQR Program, we aim to not only 

provide a common mechanism (CDC 

NHSN) for all hospitals, including 

PCHs, to uniformly report the measure 

data, but also to inform their clinicians 

of the impact of targeted prevention 

efforts. In addition, and most 

importantly, we believe that collecting 

this measure data in the PCH setting is 

necessary to support our effort to 

prevent unnecessary additional or 

prolonged hospitalizations (and 

associated costs), and to decrease 

premature death among cancer patients. 

We are inviting public comments on 

our proposal to add the CDC NHSN HCP 

Measure to the PCHQR Program 

beginning with the FY 2018 program. 

In summary, we are proposing three 

new measures for reporting beginning 

with the FY 2018 program. In 

conjunction with our proposal to 

remove the six SCIP measures from the 

PCHQR Program beginning with Q4 

2015 discharges, the PCHQR measure 

set would consist of 16 measures 

beginning with the FY 2018 program. 

Our proposed policies regarding the 

form, manner, and timing of data 

collection for these measures are 

discussed in section VIII.B.7. of the 

preamble to this proposed rule. 

The table below lists all previously 

adopted measures as well as the 

proposed new measures for the PCHQR 

Program beginning with the FY 2018 

program. It does not include the 

measures we are proposing to remove. 

Topic Summary of finalized and proposed PCHQR Program measures beginning with the FY 2018 program 

Safety and Healthcare-Associated Infection—HAI.• CDC NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139).* 

• CDC NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138).* 

• Harmonized Procedure Specific Surgical Site Infection (SSI) Outcome Measure* [currently includes SSIs following Colon Surgery and Abdominal Hysterectomy Surgery] (NQF #0753).* 

• CDC NHSN Facility-wide Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome Measure (NQF 

#1717).** 

• CDC NHSN Facility-wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) 

Bacteremia Outcome Measure (NQF #1716).** 

• CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel [HCP] (NQF #0431).** 

Clinical Process/Cancer-Specific Treatments.• Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients 

Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer (NQF #0223).* 

• Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for 

Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer (NQF #0559).* 

• Adjuvant Hormonal Therapy (NQF #0220).* 

Clinical Process/Oncology 

Care Measures.

• Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382).* 

• Oncology: Plan of Care for Pain (NQF #0383).* 

• Oncology: Pain Intensity Quantified (NQF #0384).* 

• Prostate Cancer: Adjuvant Hormonal Therapy for High Risk Patients (NQF #0390).* 

• Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (NQF #0389).* 

Patient Engagement/Experience of Care.• HCAHPS [Hospital Consumer Assessment of Healthcare Providers and Systems Survey] (NQF #0166).* 

Clinical Effectiveness Measure.• External Beam Radiotherapy for Bone Metastases (NQF #1822).* 

* Previously finalized measures. 

** Proposed for the FY 2018 program and subsequent years in this proposed rule. 

4. Possible New Quality Measure Topics 

for Future Years 

Future quality measure topics and 

quality measure domain areas are 

discussed in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50280). In 

addition, we welcome public comment 

and specific suggestions for measure 

topics addressing the following CMS 

Quality Strategy domains: Making care 

affordable; communication and 

coordination; and working with 

communities to promote best practices 

of healthy living. 


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5. Maintenance of Technical 

Specifications for Quality Measures 

We maintain technical specifications 

for the PCHQR Program measures, and 

we periodically update those 

specifications. The specifications may 

be found on the QualityNet Web site at: 

https://qualitynet.org/dcs/Content

Server?c=Page&pagename=

QnetPublic%2FPage%2FQnet

Tier2&cid=1228774479863. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50281), we described a 

policy under which we use a 

subregulatory process to make 

nonsubstantive updates to measures 

used for the PCHQR Program. We are 

not proposing any changes to this policy 

in this proposed rule. 

6. Public Display Requirements 

a. Background 

Section 1866(k)(4) of the Act requires 

the Secretary to establish procedures for 

making the data submitted under the 

PCHQR Program available to the public. 

Such procedures must ensure that a 

PCH has the opportunity to review the 

data that are to be made public with 

respect to the PCH prior to such data 

being made public. Section 1866(k)(4) of 

the Act also provides that the Secretary 

must report quality measures of process, 

structure, outcome, patients’ perspective 

on care, efficiency, and costs of care that 

relate to services furnished in such 

hospitals on the CMS Web site. 

In order to meet these requirements, 

in the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53562 through 53563), we 

finalized our policy to publicly display 

PCHQR Program data on the Hospital 

Compare Web site (http://

www.hospitalcompare.hhs.gov/) and 

established a preview period of 30 days 

prior to making such data public. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50847 through 50848), we 

finalized our proposal to display 

publicly in 2014 and subsequent years 

the data for two measures. In the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50282), we finalized our proposal to 

display publicly in 2015 and subsequent 

years the data for one measure and our 

proposal to display publicly no later 

than 2017 the data for two additional 

measures. In summary, we have 

finalized proposals to publicly display 

five PCHQR measures on Hospital 

Compare, including three Cancer 

Specific Treatment measures and two 

CDC NHSN HAI measures. 

SUMMARY OF FINALIZED PUBLIC DISPLAY REQUIREMENTS

Measures Public reporting 

• Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis to Patients 

Under the Age of 80 with AJCC III (lymph node positive) Colon Cancer (NQF #0223).

2014 and subsequent years 

• Combination Chemotherapy is Considered or Administered Within 4 Months (120 days) of Diagnosis for Women 

Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer (NQF #0559).

• Adjuvant Hormonal Therapy (NQF #0220) ................................................................................................................ 2015 and subsequent years. 

• CDC NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) ............... 2017 and subsequent years. 

• CDC NHSN Catheter-Associated Urinary Tract Infections (CAUTI) Outcome Measure (NQF #0138).

b. Proposed Additional Public Display 

Requirements 

We are proposing to publicly display 

six additional PCHQR measures 

beginning in 2016 and for subsequent 

years: 

• Oncology: Radiation Dose Limits to 

Normal Tissues (NQF #0382) 

• Oncology: Plan of Care for Pain (NQF 

#0383) 

• Oncology: Pain Intensity Quantified 

(NQF #0384) 

• Prostate Cancer: Adjuvant Hormonal 

Therapy for High Risk Patients (NQF 

#0390) 

• Prostate Cancer: Avoidance of 

Overuse of Bone Scan for Staging 

Low-Risk Patients (NQF #0389) 

• HCAHPS (NQF #0166) 

We are inviting public comment on 

these proposals. 

7. Form, Manner, and Timing of Data 

Submission 

a. Background 

Section 1866(k)(2) of the Act requires 

that, beginning with the FY 2014 

PCHQR Program, each PCH must submit 

to the Secretary data on quality 

measures specified under section 

1866(k)(3) of the Act in a form and 

manner, and at a time, as specified by 

the Secretary. 

Data submission requirements and 

deadlines for the PCHQR Program are 

generally posted on the QualityNet Web 

site at: http://www.qualitynet.org/dcs/

ContentServer?c=Page&pagename=

QnetPublic%2FPage%2FQnet

Tier3&cid=1228772864228. 

b. Proposed Reporting Requirements for 

Proposed New Measures: CDC NHSN 

CDI (NQF #1717), CDC NHSN MRSA 

(NQF #1716), and CDC NHSN HCP 

(NQF #0431) Measures 

We are proposing that PCHs submit 

CDC NHSN CDI, MRSA, and HCP 

measure data for all patients to the CDC 

through the NHSN database. This is the 

same procedural/reporting mechanism 

used for the CDC NHSN CLABSI and 

CAUTI measures that we finalized in 

the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53563 through 53564) and for the 

CDC SSI measure that we finalized in 

the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50848 through 50850). The data 

submission and reporting procedures 

have been set forth by the CDC for 

NHSN participation in general and for 

submission of the CDC NHSN CDI, 

MRSA, and HCP measures to NHSN. We 

refer readers to the CDC’s Web site 

(http://www.cdc.gov/nhsn/cms/index.

html) for detailed data submission and 

reporting procedures. 

We are proposing to adopt a quarterly 

submission process for the CDC NHSN 

CDI and MRSA measures as shown in 

the table below. We have successfully 

implemented this reporting mechanism 

in the Hospital IQR Program (77 FR 

53539), and we strongly believe that this 

type of data submission is the most 

feasible option because PCHs are 

currently reporting the CDC NHSN 

CAUTI, CLABSI, and CDC SSI measures 

to the CDC NHSN this way. 


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203CDC Multidrug—Resistant Organism & 

Clostridium difficile Infection (MDRO/CDI) Module. 

Available at: http://www.cdc.gov/nhsn/PDFs/psc

Manual/12pscMDRO_CDADcurrent.pdf. 

204CDC HCP Vaccination Module. Available at: 

http://www.cdc.gov/nhsn/PDFs/HPS-manual/

vaccination/HPS-flu-vaccine-protocol.pdf. 

PROPOSED CDC NHSN CDI (NQF #1717) AND CDC NHSN MRSA (NQF #1716) MEASURES REPORTING PERIODS AND

SUBMISSION TIMEFRAMES BEGINNING WITH THE FY 2018 PROGRAM

Program year 

(FY) 

Reporting periods 

(CY) 

Data submission deadlines 

(CY) 

2018 ................................... Q1 2016 events ...................................................................................................

(January 1, 2016–March 31, 2016). 

August 15, 2016. 

Q2 2016 events ...................................................................................................

(April 1, 2016–June 30, 2016) 

November 15, 2016. 

Q3 2016 events ...................................................................................................

(July 1, 2016–September 30, 2016). 

February 15, 2017. 

Q4 2016 events ...................................................................................................

(October 1, 2016–December 31, 2016). 

May 15, 2017. 

Subsequent Years ............. Q1 events ............................................................................................................

(January 1–March 31 of year 2 years before the program year). 

August 15 of year two years before the program year. 

Q2 events ............................................................................................................

(April 1–June 30 of year 2 years before the program year). 

November 15 of year 2 years before the program year. 

Q3 events ............................................................................................................

(July 1–September 30 of year 2 years before the program year). 

February 15 of year 1 year before 

the program year. 

Q4 events ............................................................................................................

(October 1–December 31 of year 2 years before the program year). 

May 15 of 

year 1 year before the program 

year. 

For the CDC NHSN HCP measure, we 

are proposing that data be submitted 

annually by May 15 of the applicable 

year as shown in the table below. The 

vaccination period runs from October 

through March. The proposed reporting 

period for FY 2018 will include Q4 2016 

and Q1 2017 counts submitted by May 

15, 2017. 

PROPOSED CDC NHSN HCP (NQF #0431) MEASURE REPORTING PERIODS AND SUBMISSION TIMEFRAMES BEGINNING

WITH THE FY 2018 PROGRAM

Program year 

(FY) 

Reporting periods 

(CY) 

Data submission deadlines 

(CY) 

2018 ................................... Q4 2016 counts ...................................................................................................

(October 1, 2016—December 31, 2016). 

May 15, 2017. 

Q1 2017 counts ...................................................................................................

(January 1, 2017—March 31, 2017). 

Subsequent Years ............. Q4 counts ............................................................................................................

(October 1—December 31 of year 2 years before the program year). 

May 15 of year 1 year before the 

program year. 

Q1 counts ............................................................................................................

(January 1—March 31 of year 1 year before the program year). 

We are inviting public comments on 

these proposals. 

As specified by CDC, the CDC NHSN 

CDI, MRSA, and HCP measures are 

reported on a facility-wide basis.203 204

Accordingly, we are not proposing a 

sampling methodology for these 

measures because CDC requirements are 

to collect data on all patients or HCP in 

the facility. However, measures 

specifications could be technically 

updated by the measure steward (CDC). 

We refer readers to the CDC Web site for 

technical changes and/or updates 

(http://www.cdc.gov/nhsn/acute-carehospital/index.html). 

We also intend to issue guidance to 

PCHs that will provide additional 

clarity regarding the specific data 

submission deadlines that we 

previously finalized for certain PCHQR 

measures. This guidance will be issued 

through the QualityNet Web site. 

C. Long-Term Care Hospital Quality 

Reporting Program (LTCH QRP) 

1. Background and Statutory Authority 

Section 3004(a) of the Affordable Care 

Act amended section 1886(m)(5) of the 

Act, requiring the Secretary to establish 

the Long-Term Care Hospital Quality 

Reporting Program (LTCH QRP). This 

program applies to all hospitals certified 

by Medicare as LTCHs. Beginning with 

the FY 2014 payment determination and 

subsequent years, the Secretary is 

required to reduce any annual update to 

the standard Federal rate for discharges 

occurring during such fiscal year by 2 

percentage points for any LTCH that 

does not comply with the requirements 

established by the Secretary. 

The Act requires that, for the FY 2014 

payment determination and subsequent 

years, each LTCH submit data on quality 

measures specified by the Secretary in 

a form and manner, and at a time, 

specified by the Secretary. The 

Secretary is required to specify quality 

measures that are endorsed by the entity 

with a contract under section 1890(a) of 

the Act. This entity is currently the 

NQF. Information regarding the NQF is 

available at: http://

www.qualityforum.org/Measuring_

Performance/Measuring_

Performance.aspx. The Act authorizes 

an exception under which the Secretary 

may specify non-NQF-endorsed quality 

measures in the case of specified areas 

or medical topics determined 

appropriate by the Secretary for which 

a feasible or practical measure has not 

been endorsed by the NQF, as long as 

due consideration is given to measures 

that have been endorsed or adopted by 

a consensus organization identified by 

the Secretary. We refer readers to the FY 

2015 IPPS/LTCH PPS final rule (79 FR 


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50286) for a detailed discussion of the 

history of the LTCH QRP. 

In addition, section 1206(c) of the 

Pathway for SGR Reform Act of 2013 

added section 1886(m)(5)(D)(iv) of the 

Act, which requires the Secretary to 

establish, not later than October 1, 2015, 

a functional status quality measure 

under the LTCH QRP for change in 

mobility among inpatients requiring 

ventilator support. We refer readers to 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50298) for a detailed discussion 

of the Functional Outcome Measure: 

Change in Mobility among Long-Term 

Care Hospital Patients Requiring 

Ventilator Support, which we adopted 

in the LTCH QRP for the FY 2018 

payment determination and subsequent 

years to meet the requirements of 

section 1886(m)(5)(D)(iv) of the Act. 

Finally, the Improving Medicare PostAcute Care Transformation Act of 2014 

(Pub. L. 113–185) (the IMPACT Act of 

2014) amended the Act in ways that 

affect the LTCH QRP. Specifically, 

section 2(a) of the IMPACT Act of 2014 

added section 1899B of the Act, and 

section 2(c)(3) of the IMPACT Act of 

2014 amended section 1886(m)(5) of the 

Act. 

New section 1899B of the Act is titled 

Standardized Post-Acute Care (PAC) 

Assessment Data for Quality, Payment 

and Discharge Planning. Under section 

1899B(a)(1) of the Act, the Secretary 

must require post-acute care (PAC) 

providers (defined in section 

1899B(a)(2)(A) of the Act to include 

HHAs, SNFs, IRFs, and LTCHs) to 

submit standardized patient assessment 

data in accordance with section 

1899B(b) of the Act, data on quality 

measures required under section 

1899B(c)(1) of the Act, and data on 

resource use and other measures 

required under section 1899B(d)(1) of 

the Act. The Act also sets out specified 

application dates for each of the 

measures. The Secretary must specify 

the quality, resource use, and other 

measures not later than the applicable 

specified application date defined in 

section 1899B(a)(2)(E) of the Act. 

Section 1899B(b) of the Act describes 

the standardized patient assessment 

data that PAC providers are required to 

submit in accordance with section 

1899B(b)(1) of the Act; requires the 

Secretary, to the extent practicable, to 

match claims data with standardized 

patient assessment data in accordance 

with section 1899B(b)(2) of the Act; and 

requires the Secretary, as soon as 

practicable, to revise or replace existing 

patient assessment data to the extent 

that such data duplicate or overlap with 

standardized patient assessment data, in 

accordance with section 1899B(b)(3) of 

the Act. 

Sections 1899B(c)(1) and (d)(1) of the 

Act direct the Secretary to specify 

measures that relate to at least five 

stated quality domains and three stated 

resource use and other measure 

domains. Section 1899B(c)(1) of the Act 

provides that the quality measures on 

which PAC providers, including LTCHs, 

are required to submit standardized 

patient assessment data and other 

necessary data specified by the 

Secretary must be with respect to at 

least the following domains: 

• Functional status, cognitive 

function, and changes in function and 

cognitive function; 

• Skin integrity and changes in skin 

integrity; 

• Medication reconciliation; 

• Incidence of major falls; and 

• Accurately communicating the 

existence of and providing for the 

transfer of health information and care 

preferences of an individual to the 

individual, family caregiver of the 

individual, and providers of services 

furnishing items and services to the 

individual when the individual 

transitions (1) from a hospital or CAH to 

another applicable setting, including a 

PAC provider or the home of the 

individual, or (2) from a PAC provider 

to another applicable setting, including 

a different PAC provider, hospital, CAH, 

or the home of the individual. 

Section 1899B(c)(2)(A) of the Act 

provides that, to the extent possible, the 

Secretary must require such reporting 

through the use of a PAC assessment 

instrument and modify the instrument 

as necessary to enable such use. 

Section 1899B(d)(1) of the Act 

provides that the resource use and other 

measures on which PAC providers, 

including LTCHs, are required to submit 

any necessary data specified by the 

Secretary, which may include 

standardized assessment data in 

addition to claims data, must be with 

respect to at least the following 

domains: 

• Resource use measures, including 

total estimated Medicare spending per 

beneficiary; 

• Discharge to community; and 

• Measures to reflect all-condition 

risk-adjusted potentially preventable 

hospital readmission rates. 

Sections 1899B(c) and (d) of the Act 

indicate that data satisfying the eight 

measure domains in the IMPACT Act of 

2014 is the minimum data reporting 

requirement. Therefore, the Secretary 

may specify additional measures and 

additional domains. 

Section 1899B(e)(1) of the Act 

requires that the Secretary implement 

the quality, resource use, and other 

measures required under sections 

1899B(c)(1) and (d)(1) of the Act in 

phases consisting of measure 

specification, data collection, and data 

analysis; the provision of feedback 

reports to PAC providers in accordance 

with section 1899B(f) of the Act; and 

public reporting of PAC providers’ 

performance on such measures in 

accordance with section 1899B(g) of the 

Act. Section 1899B(e)(2) of the Act 

generally requires that each measure 

specified by the Secretary under section 

1899B of the Act be NQF-endorsed, but 

authorizes an exception under which 

the Secretary may select non-NQFendorsed quality measures in the case of 

specified areas or medical topics 

determined appropriate by the Secretary 

for which a feasible or practical measure 

has not been endorsed by the NQF, as 

long as due consideration is given to 

measures that have been endorsed or 

adopted by a consensus organization 

identified by the Secretary. Section 

1899B(e)(3) of the Act provides that the 

pre-rulemaking process required by 

section 1890A of the Act applies to 

quality, resource use, and other 

measures specified under sections 

1899B(c)(1) and (d)(1) of the Act, but 

authorizes exceptions under which the 

Secretary may (1) use expedited 

procedures, such as ad hoc reviews, as 

necessary in the case of a measure 

required with respect to data 

submissions during the 1-year period 

before the applicable specified 

application date, or (2) alternatively, 

waive section 1890A of the Act in the 

case of such a measure if applying 

section 1890A of the Act (including 

through the use of expedited 

procedures) would result in the inability 

of the Secretary to satisfy any deadline 

specified under section 1899B of the Act 

with respect to the measure. 

Section 1899B(f)(1) of the Act requires 

the Secretary to provide confidential 

feedback reports to PAC providers on 

the performance of such PAC providers 

with respect to quality, resource use, 

and other measures required under 

sections 1899B(c)(1) and (d)(1) of the 

Act beginning 1 year after the applicable 

specified application date. 

Section 1899B(g) of the Act requires 

the Secretary to establish procedures for 

making available to the public 

information regarding the performance 

of individual PAC providers with 

respect to quality, resource use, and 

other measures required under sections 

1899B(c)(1) and (d)(1) of the Act 

beginning not later than 2 years after the 

applicable specified application date. 

The procedures must ensure, including 

through a process consistent with the 


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process applied under section 

1886(b)(3)(B)(viii)(VII) of the Act for 

similar purposes, that each PAC 

provider has the opportunity to review 

and submit corrections to the data and 

information that are to be made public 

with respect to the PAC provider prior 

to such data being made public. 

Section 1899B(h) of the Act sets out 

requirements for removing, suspending, 

or adding quality, resource use, and 

other measures required under sections 

1899B(c)(1) and (d)(1) of the Act. 

Section 1899B(i) of the Act requires 

that not later than January 1, 2016, and 

periodically thereafter (but not less 

frequently than once every 5 years), the 

Secretary must promulgate regulations 

to modify the Medicare conditions of 

participation (CoPs) and subsequent 

interpretative guidance applicable to 

PAC providers, hospitals, and CAHs to, 

among other things, take into account 

quality, resource use, and other 

measures in the discharge planning 

process. 

Section 1899B(j) of the Act requires 

the Secretary to allow for stakeholder 

input, such as through town halls, open 

door forums, and mailbox submissions, 

before the initial rulemaking process to 

implement section 1899B of the Act. 

Section 2(c)(3) of the IMPACT Act of 

2014 amended section 1886(m)(5) of the 

Act to address the payment 

consequences for LTCHs with respect to 

the additional data which LTCHs are 

required to submit under section 1899B 

of the Act. This section added new 

sections 1886(m)(5)(F) and (G) to the 

Act and made conforming changes. New 

section 1886(m)(5)(F) of the Act requires 

LTCHs (other than a hospital classified 

under section 1886(d)(1)(B)(iv)(II)) of 

the Act to submit the following 

additional data: (1) For the fiscal year 

beginning on the applicable specified 

application date and subsequent years, 

data on the quality, resource use, and 

other measures required under sections 

1899B(c)(1) and (d)(1) of the Act; and (2) 

for FY 2019 and subsequent years, the 

standardized patient assessment data 

required under section 1899B(b)(1) of 

the Act. Such data must be submitted in 

the form and manner, and at the time, 

specified by the Secretary. Finally, new 

section 1886(m)(5)(G) of the Act 

generally provides that to the extent that 

the additional data required under 

section 1886(m)(5)(F) of the Act 

duplicates other data required under 

section 1886(m)(5)(C) of the Act, 

submission of the former must be in lieu 

of submission of the latter. 

As stated above, the IMPACT Act of 

2014 adds a new section 1899B to the 

Act that imposes new data reporting 

requirements for certain post-acute care 

(PAC) providers, including LTCHs. 

Sections 1899B(c)(1) and 1899B(d)(1) of 

the Act collectively require that the 

Secretary specify quality measures and 

resource use and other measures with 

respect to certain domains not later than 

the specified application date that 

applies to each measure domain and 

PAC provider setting. Section 

1899B(a)(2)(E) of the Act delineates the 

specified application dates for each 

measure domain and PAC provider. The 

IMPACT Act of 2014 also amends 

various other sections of the Act, 

including section 1886(m)(5) of the Act, 

to require the Secretary to reduce the 

otherwise applicable PPS payment to a 

PAC provider that does not report the 

new data in a form and manner, and at 

a time, specified by the Secretary. For 

LTCHs, amended section 

1886(m)(5)(A)(i) of the Act would 

require the Secretary to reduce the 

payment update for any LTCH that does 

not satisfactorily submit the new 

required data. 

Under the current LTCH QRP, the 

general timeline and sequencing of 

measure implementation occurs as 

follows: Specification of measures; 

proposal and finalization of measures 

through notice-and-comment 

rulemaking; LTCH submission of data 

on the adopted measures; analysis and 

processing of the submitted data; 

notification to LTCHs regarding their 

quality reporting compliance with 

respect to a particular rate year; 

consideration of any reconsideration 

requests; and imposition of a payment 

reduction in a particular rate year for 

failure to satisfactorily submit data with 

respect to that rate year. Any payment 

reductions that are taken with respect to 

a rate year begin approximately one year 

after the end of the data submission 

period for that rate year and 

approximately two years after we first 

adopt the measure. 

To the extent that the IMPACT Act of 

2014 could be interpreted to shorten 

this timeline so as to require us to 

reduce an LTCH’s PPS payment for 

failure to satisfactorily submit data on a 

measure specified under section 

1899B(c)(1) or (d)(1) of the Act 

beginning with the same rate year as the 

specified application date for that 

measure, such a timeline would not be 

feasible. The current timeline discussed 

above reflects operational and other 

practical constraints, including the time 

needed to specify and adopt valid and 

reliable measures, collect the data, and 

determine whether an LTCH has 

complied with our quality reporting 

requirements. It also takes into 

consideration our desire to give LTCHs 

enough notice of new data reporting 

obligations so that they are prepared to 

timely start reporting the data. 

Therefore, we intend to follow the same 

timing and sequence of events for 

measures specified under sections 

1899B(c)(1) and (d)(1) of the Act that we 

currently follow for other measures 

specified under the LTCH QRP. We 

intend to specify each of these measures 

no later than the specified application 

dates set forth in section 1899B(a)(2)(E) 

of the Act and are proposing to adopt 

them consistent with the requirements 

in the Act and Administrative 

Procedure Act. To the extent that we 

finalize a proposal to adopt a measure 

for the LTCH QRP that satisfies an 

IMPACT Act of 2014 measure domain, 

we intend to require LTCHs to report 

data on the measure for the rate year 

that begins two years after the specified 

application date for that measure. 

Likewise, we intend to require LTCHs to 

begin reporting any other data 

specifically required under the IMPACT 

Act of 2014 for the rate year that begins 

two years after we adopt requirements 

that would govern the submission of 

that data. 

2. General Considerations Used for 

Selection of Quality, Resource Use, and 

Other Measures for the LTCH QRP 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50286 

through 50287) for a detailed discussion 

of the considerations we use for the 

selection of LTCH QRP quality 

measures. In this proposed rule, we 

apply the same considerations to the 

selection of quality, resource use, and 

other measures required under section 

1899B of the Act for the LTCH QRP, in 

addition to the considerations discussed 

below. 

The quality measures we are 

proposing address some of the measure 

domains that the Secretary is required to 

specify under sections 1899B(c)(1) and 

(d)(1) of the Act. The totality of the 

measures considered to meet the 

requirements of the IMPACT Act of 

2014 will evolve, and additional 

measures will be proposed over time as 

they become available. 

To meet the first specified application 

date applicable to LTCHs under section 

1899B(a)(2)(E) of the Act, which is 

October 1, 2016, we have focused on 

measures that: 

• Correspond to a measure domain in 

section 1899B(c)(1) or (d)(1) of the Act 

and are setting-agnostic: For example, 

falls with major injury and the 

incidence of pressure ulcers; 

• Are currently adopted for one or 

more of our PAC quality reporting 

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use, or already previewed by the MAP 

with support; 

• Minimize added burden on LTCHs; 

• Minimize or avoid, to the extent 

feasible, revisions to the existing items 

in assessment tools currently in use (for 

example, the LTCH CARE Data Set); 

• Avoid, where possible, duplication 

of existing assessment items. 

In our selection and specification of 

measures, we employ a transparent 

process in which we seek input from 

stakeholders and national experts and 

engage in a process that allows for prerulemaking input on each measure, as 

required by section 1890A of the Act. 

This process is based on a privatepublic partnership, and it occurs via the 

MAP. The MAP is composed of multistakeholder groups convened by the 

NQF, our current contractor under 

section 1890 of the Act, to provide input 

on the selection of quality and 

efficiency measures described in section 

1890(b)(7)(B) of the Act. The NQF must 

convene these stakeholders and provide 

us with the stakeholders’ input on the 

selection of such measures. We, in turn, 

must take this input into consideration 

in selecting such measures. In addition, 

the Secretary must make available to the 

public by December 1 of each year a list 

of such measures that the Secretary is 

considering under title XVIII of the Act. 

As discussed in section VIII.C.1. of 

the preamble of this proposed rule, 

section 1899B(e)(3) of the Act provides 

that the pre-rulemaking process 

required by section 1890A of the Act 

applies to the measures required under 

section 1899B, subject to certain 

exceptions for expedited procedures or, 

alternatively, waiver of section 1890A of 

the Act. 

We initiated an Ad Hoc MAP process 

for the review of the quality measures 

under consideration for proposal in 

preparation for adoption of those quality 

measures into the LTCH QRP that are 

required by the IMPACT Act of 2014, 

and which must be specified by October 

1, 2016. The List of Measures under 

Consideration (MUC List) under the 

IMPACT Act of 2014 was made 

available to the public for comment 

during the MAP Meeting on February 9, 

2015 (http://www.meeting-support.com/ 

downloads/703163/4524/

PACLTC%20Ad%20Hoc%

20Slides.pdf). Under the IMPACT Act of 

2014, these measures must be 

standardized so they can be applied 

across PAC settings and must 

correspond to measure domains 

specified in sections 1899B(c)(1) and 

(d)(1) of the IMPACT Act of 2014. The 

specific cross-setting application of the 

measures under consideration for each 

such measure is discussed in the MAP 

Off-Cycle Deliberations 2015: Measures 

under Consideration to Implement 

Provisions of the IMPACT Act: Final 

Report available at: http://www.quality

forum.org/Setting_Priorities/

Partnership/MAP_Final_Reports.aspx. 

The MAP reviewed each IMPACT Act of 

2014-related quality measure proposed 

in this proposed rule for the LTCH QRP, 

in light of its intended cross-setting use. 

We refer readers to section VIII.C.6. of 

the preamble of this proposed rule for 

more information on the MAP’s 

recommendations. 

As discussed in section VIII.C.1. of 

the preamble of this proposed rule, 

above, section 1899B(j) of the Act 

requires that we allow for stakeholder 

input as part of the pre-rulemaking 

process. To meet this requirement, we 

provided the following opportunities for 

stakeholder input: (1) Our measure 

development contractor convened a 

technical expert panel (TEP) that 

included stakeholder experts and 

patient representatives on February 3, 

2015; (2) we provided two separate 

listening sessions on February 10, 2015 

and March 5, 2015; (3) we sought public 

input during the February 2015 Ad Hoc 

MAP process provided for the sole 

purpose of reviewing the measures we 

are proposing in reaction to the IMPACT 

Act of 2014; and (4) we sought public 

comment as part of our NQF measure 

maintenance submissions. In addition, 

we implemented a public mail box for 

the submission of comments in January 

2015, PACQualityInitiative@

cms.hhs.gov, which is accessible from 

our post-acute care quality initiatives 

Web site: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/Post-AcuteCare-Quality-Initiatives/IMPACT-Act-of2014-and-Cross-Setting-Measures.html, 

and held a National Stakeholder Special 

Open Door Forum to seek input on the 

measures on February 25, 2015. 

For measures that do not have NQF 

endorsement, or which are not fully 

supported by the MAP for the LTCH 

QRP, we are proposing measures that 

most closely align with the national 

priorities discussed in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50286 

through 50287), and for which the MAP 

supports the measure concept. Further 

discussion as to the importance and 

high-priority status of these measures in 

the LTCH setting is included under each 

quality measure proposal in the 

preamble of this proposed rule. In 

addition, for measures not endorsed by 

the NQF, we have sought, to the extent 

practicable, to adopt measures that have 

been endorsed or adopted by a national 

consensus organization, recommended 

by multi-stakeholder organizations, and/ 

or developed with the input of 

providers, purchasers/payers, and other 

stakeholders. 

3. Policy for Retention of LTCH QRP 

Measures Adopted for Previous 

Payment Determinations 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53614 through 53615), for 

the LTCH QRP, we adopted a policy that 

once a quality measure is adopted, it 

will be retained for use in subsequent 

years, unless otherwise stated. For the 

purpose of streamlining the rulemaking 

process, when we initially adopt a 

measure for the LTCH QRP for a 

payment determination, this measure 

will be automatically adopted for all 

subsequent years or until we propose to 

remove, suspend, or replace the 

measure. For further information on 

how measures are considered for 

removal, we refer readers to the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53614 

through 53615). 

In this proposed rule, we are not 

proposing any changes to this policy for 

retaining LTCH QRP measures adopted 

for previous payment determinations. 

4. Policy for Adopting Changes to LTCH 

QRP Measures 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53615 through 53616), we 

finalized a policy that if the NQF 

updates an endorsed measure that we 

have adopted for the LTCH QRP in a 

manner that we consider to not 

substantively change the nature of the 

measure, we will use a subregulatory 

process to incorporate those updates to 

the measure specifications that apply to 

the LTCH QRP. Substantive changes 

will be proposed and finalized through 

rulemaking. We refer readers to the FY 

2013 IPPS/LTCH PPS final rule (77 FR 

53615 through 53616) for further 

information on what constitutes 

substantive and nonsubstantive changes 

to a measure. We are not proposing any 

changes to the policy for adopting 

changes to LTCH QRP measures. 

5. Previously Adopted Quality Measures 

a. Previously Adopted Quality Measures 

for the FY 2015 and FY 2016 Payment 

Determinations and Subsequent Years 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53624 through 53636), for 

the FY 2014 payment determination and 

subsequent years, we adopted updated 

versions of National Health Safety 

Network (NHSN) Catheter-Associated 

Urinary Tract Infection (CAUTI) 

Outcome Measure (NQF #0138) and the 

NHSN Central Line-Associated Blood 

Stream Infection (CLABSI) Outcome 

Measure (NQF #0139). For the FY 2015 

payment determination and subsequent 


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years, we retained the application of 

Percent of Residents with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) measure (NQF #0678) to the 

LTCH setting (initially adopted in the 

FY 2012 IPPS/LTCH PPS final rule (76 

FR 51745 through 51750)). We also 

adopted two new quality measures for 

the LTCH QRP for the FY 2016 payment 

determination and subsequent years, in 

addition to the three previously adopted 

measures (the CAUTI measure, CLABSI 

measure, and Pressure Ulcer measure): 

(1) Percent of Residents or Patients Who 

Were Assessed and Appropriately Given 

the Seasonal Influenza Vaccine (Short 

Stay) (NQF #0680); and (2) Influenza 

Vaccination Coverage among Healthcare 

Personnel (NQF #0431) (77 FR 53624 

through 53636). 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50861 through 50863), we 

adopted the NQF-endorsed version of 

the Pressure Ulcer measure, Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) measure (NQF #0678), for 

the LTCH QRP for the FY 2015 payment 

determination and subsequent years. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50289 through 50305), we 

revised the data collection and 

submission period for the Percent of 

Residents or Patients Who Were 

Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short-Stay) 

measure (NQF #0680). 

Set out below are the quality 

measures, both previously adopted 

measures retained in the LTCH QRP and 

measures adopted in FY 2013 and FY 

2014 IPPS/LTCH PPS final rules, for the 

FY 2015 and FY 2016 payment 

determinations and subsequent years. 

LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2015 AND FY 2016 PAYMENT DETERMINATIONS

AND SUBSEQUENT YEARS

NQF Measure ID Measure title Payment determination 

NQF #0138 ................ National Health Safety Network (NHSN) Catheter-Associated Urinary Tract Infection 

(CAUTI) Outcome Measure.

FY 2015 and Subsequent Fiscal 

Years. 

NQF #0139 ................ National Health Safety Network (NHSN) Central Line-Associated Blood Stream Infection (CLABSI) Outcome Measure.FY 2015 and Subsequent Fiscal 

Years. 

NQF #0678 ................ Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened 

(Short Stay).

FY 2015 and Subsequent Fiscal 

Years. 

NQF #0680 ................ Percent of Residents or Patients Who Were Assessed and Appropriately Given the 

Seasonal Influenza Vaccine (Short Stay).

FY 2016 and Subsequent Fiscal 

Years. 

NQF #0431 ................ Influenza Vaccination Coverage among Healthcare Personnel ...................................... FY 2016 and Subsequent Fiscal 

Years. 

b. Previously Adopted Quality Measures 

for the FY 2017 and FY 2018 Payment 

Determinations and Subsequent Years 

In the FY 2014 IPPS/LTCH PPS final 

rule, we adopted three additional 

measures for the FY 2017 payment 

determination and subsequent years (78 

FR 50863 through 50874) and one 

additional measure for the FY 2018 

payment determination and subsequent 

years (78 FR 50874 through 50877). 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50289 through 50305), we: 

(1) Revised the data collection and 

submission period for the application of 

the Percent of Residents Experiencing 

One or More Falls with Major Injury 

(Long Stay) measure (NQF #0674); and 

(2) adopted three new quality measures 

for the FY 2018 payment determination 

and subsequent years. 

These measures are set out in the 

table below. 

LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS

AND SUBSEQUENT YEARS

NQF Measure ID Measure title Payment determination 

NQF #1716 ................ National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.

FY 2017 and Subsequent 

Years. 

NQF #1717 ................ National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) Outcome Measure.

FY 2017 and Subsequent 

Years. 

NQF #2512 ................ All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from LongTerm Care Hospitals.FY 2017 and Subsequent 

Years. 

Application of NQF 

#0674.

Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) ... FY 2018 and Subsequent 

Years. 

NQF #2631 * .............. Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function.FY 2018 and Subsequent 

Years. 

NQF #2632 * .............. Functional Outcome Measure: Change in Mobility among Long-Term Care Hospital 

Patients Requiring Ventilator Support.

FY 2018 and Subsequent 

Years. 

Not NQF endorsed .... National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure.FY 2018 and Subsequent 

Years. 

* Under review at NQF. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867, NQF #2631 and NQF #2632. 

6. Previously Adopted LTCH QRP 

Quality Measures Proposed for the FY 

2018 Payment Determination and 

Subsequent Years 

For the FY 2018 payment 

determination and subsequent years, in 

addition to the measures we are 

retaining under our policy described in 

VIII.C.3. of the preamble of this 

proposed rule, we are proposing four 

quality measures to reflect the NQF 

endorsement of one measure and to 

meet the requirements of the IMPACT 

Act of 2014. These proposed measures 

are: (a) All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512) to 

reflect NQF endorsement; (b) Percent of 


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Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) to meet the 

requirements of the IMPACT Act of 

2014; (c) an application of Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674) to meet the requirements 

of the IMPACT Act of 2014; and (d) an 

application of Percent of LTCH Patients 

with an Admission and Discharge 

Functional Assessment and a Care Plan 

That Addresses Function (NQF #2631; 

under NQF review) to meet the 

requirements of the IMPACT Act of 

2014. These quality measures are 

discussed in more detail below. 

a. Proposal To Reflect NQF 

Endorsement: All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge From LTCHs (NQF #2512) 

The All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512) was 

adopted for use in the LTCH QRP in the 

FY 2014 IPPS/LTCH PPS final rule (78 

FR 50868 through 50874). We are 

proposing to adopt this measure to 

reflect that it is NQF-endorsed for use in 

the LTCH setting as of December 2014. 

Current specifications of this NQFendorsed measure are available for 

download on the NQF Web site at: 

http://www.qualityforum.org/QPS/2512. 

As adopted in the FY 2014 IPPS/

LTCH PPS final rule, this is a Medicare 

FFS claims-based measure, and LTCHs 

are not required to report any additional 

data to CMS. Because we would 

calculate this measure based on claims 

data that are already reported to the 

Medicare program for payment 

purposes, we believe there would be no 

additional data collection burden on 

LTCHs resulting from our 

implementation of this measure as part 

of the LTCH QRP. In the FY 2014 IPPS/ 

LTCH PPS final rule, we stated that we 

will calculate this measure using claims 

data beginning with FY 2013 and FY 

2014 and provide initial feedback to 

LTCHs prior to public reporting of this 

measure. However, the NQF-endorsed 

measure (NQF #2512) is based on 2 

consecutive calendar years of Medicare 

FFS claims data. Therefore, in addition 

to our proposal to adopt the NQFendorsed version of this measure, we 

are proposing that the initial calculation 

of the measure and feedback to LTCHs, 

prior to public reporting of this 

measure, would be based on CY 2013 

and CY 2014 Medicare FFS claims data 

related to readmissions post-LTCH 

discharge. 

The description of this measure 

provided in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50868 through 

50874) noted this measure is the ratio of 

the number of risk-adjusted predicted 

unplanned readmissions for each LTCH, 

including the estimated facility effect, to 

the average number of risk-adjusted 

predicted unplanned readmissions for 

the same patients if treated at a facility 

with the average effect on readmissions. 

This ratio is referred to as the 

standardized risk ratio or SRR. The 

NQF-endorsed specifications compute 

the risk-standardized readmission rate 

(RSRR) for this measure. The RSRR is 

the SRR multiplied by the overall 

national raw readmission rate for all 

LTCH stays; it is expressed as a 

percentage rate rather than a ratio. 

This measure, which was developed 

to harmonize with the Hospital-Wide 

All-Cause Unplanned Readmission 

Measure (NQF #1789) that is currently 

in use in the Hospital IQR Program, 

continues to use the CMS Planned 

Readmission Algorithm as the main 

component for identifying planned 

readmissions. This algorithm was 

refined in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50211 through 50216). 

The All-Cause Unplanned Readmission 

Measure for 30 Days Post Discharge 

from LTCHs (NQF #2512) for the LTCH 

QRP will utilize the most recently 

updated version of the algorithm. A 

complete description of the CMS 

Planned Readmission Algorithm, which 

includes lists of planned diagnoses and 

procedures, can be found on the CMS 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/

HospitalQualityInits/MeasureMethodology.html. The additional postacute care planned readmission types 

specified for this measure remain the 

same as when first adopted through the 

FY 2014 IPPS/LTCH PPS final rule. 

Documentation on the additional postacute care planned readmissions for this 

measure is available at: http:// 

www.qualityforum.org/ProjectTemplate

Download.aspx?SubmissionID=2512. 

We are inviting public comments in 

response to (1) our proposal to adopt the 

NQF-endorsed version of All-Cause 

Unplanned Readmission Measure for 30 

Days Post Discharge from LTCHs (NQF 

#2512) for the LTCH QRP and (2) our 

proposal that the initial feedback to 

LTCHs, prior to public reporting of this 

measure, would be based on CY 2013 

and CY 2014 Medicare FFS claims data 

related to readmissions post-LTCH 

discharge. 

b. Proposal To Address the IMPACT Act 

of 2014: Quality Measure Addressing 

the Domain of Skin Integrity and 

Changes in Skin Integrity: Percent of 

Residents or Patients With Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) 

Section 1899B(c)(1) of the Act directs 

the Secretary to specify quality 

measures on which PAC providers are 

required under the applicable reporting 

provisions to submit standardized 

patient assessment data and other 

necessary data specified by the 

Secretary with respect to five quality 

domains, one of which is skin integrity 

and changes in skin integrity. The 

specified application date by which the 

Secretary must specify quality measures 

to address this domain for IRFs, SNFs, 

and LTCHs is October 1, 2016, and for 

HHAs is January 1, 2017. To satisfy 

these requirements, we are proposing to 

adopt the Percent of Residents or 

Patients with Pressure Ulcers that are 

New or Worsened (Short-Stay) (NQF 

#0678) measure, that we have already 

adopted for the LTCH QRP, as a crosssetting quality measure that satisfies the 

domain of skin integrity and changes in 

skin integrity. The reporting of data for 

this measure would affect the payment 

determination for the FY 2018 payment 

determination and subsequent years. In 

the LTCH setting, the measure assesses 

the percent of patients with Stage 2 

through Stage 4 pressure ulcers that are 

new or worsened since admission. 

As described in the FY 2012 IPPS/

LTCH PPS final rule (76 FR 51754 

through 51756), pressure ulcers are 

high-cost adverse events and are an 

important measure of quality. For 

information on the detailed rationale for 

relevance, evidence, appropriateness, 

importance, and applicability of this 

quality measure in the LTCH QRP, we 

refer readers to the FY 2012 IPPS/LTCH 

PPS final rule (76 FR 51754 through 

51756) and the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50861 through 50863). 

Measure specifications are available on 

the NQF Web site at: http://

www.qualityforum.org/QPS/0678. 

The IMPACT Act of 2014 requires the 

implementation of quality measures and 

resource use and other measures that are 

standardized and interoperable across 

PAC settings as well as the reporting of 

standardized patient assessment data 

and other necessary data specified by 

the Secretary. This requirement is in 

line with the NQF Steering Committee 

report, which stated that ‘‘to understand 

the impact of pressure ulcers across 

settings, quality measures addressing 

prevention, incidence, and prevalence 

of pressure ulcers must be harmonized 


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205National Quality Forum. National voluntary 

consensus standards for developing a framework for 

measuring quality for prevention and management 

of pressure ulcers. April 2008. Available at: 

http://www.qualityforum.org/Projects/Pressure_

Ulcers.aspx. 

206For the April 1, 2016 release of LTCH CARE 

Data Set, this item will be renumbered to GG0170C. 

and aligned.’’ 205 The Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) measure is 

NQF-endorsed and has been 

successfully implemented using a 

harmonized set of data elements in three 

PAC settings (LTCHs, IRFs, and SNFs). 

As discussed in section VIII.C.6.b. of the 

preamble of this proposed rule, above, 

an application of this measure was 

adopted for the LTCH QRP in the FY 

2012 IPPS/LTCH PPS final rule (76 FR 

51753 through 51756) for the FY 2014 

payment determination, and the current 

NQF-endorsed version of the measure 

was adopted in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50861 through 

50863) for the FY 2015 payment 

determination and subsequent years. 

The measure has been in use in the 

LTCH QRP since October 1, 2012, and 

currently, LTCHs are submitting data for 

this measure using the LTCH Continuity 

Assessment Record and Evaluation 

(CARE) Data Set. 

The Percent of Residents or Patients 

with Pressure Ulcers That Are New or 

Worsened (Short Stay) (NQF #0678) 

measure was adopted for use in the IRF 

Quality Reporting Program (QRP) in the 

FY 2012 IRF PPS final rule (76 FR 47876 

through 47878) for the FY 2014 payment 

determination and subsequent years and 

has been successfully submitted by IRFs 

using the Inpatient Rehabilitation 

Facility—Patient Assessment 

Instrument (IRF–PAI) since October 

2012. It has also been implemented in 

the CMS Nursing Home Quality 

Initiative, using the Minimum Data Set 

(MDS) Version 3.0 since 2011, and is 

currently publicly reported on CMS’ 

Nursing Home Compare at: http://

www.medicare.gov/

nursinghomecompare/search.html. 

A TEP convened by our measure 

development contractor in February 

2015, provided input on the technical 

specifications of this quality measure, as 

well as the applicability of this measure 

as a cross-setting measure across postacute care settings, including the LTCH 

setting, to meet the requirements of the 

IMPACT Act of 2014. The TEP 

supported the applicability of this 

measure as a cross-setting measure 

across post-acute care settings and also 

supported our efforts to standardize 

items for data collection and submission 

of this measure as well as our efforts to 

standardize the measure for crosssetting development. In addition, the 

MAP met on February 9, 2015, and 

provided input to CMS on the measure. 

The MAP supported the use of Percent 

of Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) measure in the 

LTCH QRP as a cross-setting quality 

measure. More information about the 

MAP’s recommendations for this 

measure is included in The MAP OffCycle Deliberations 2015: Measures 

under Consideration to Implement 

Provisions of the IMPACT Act: Final 

Report which is available at: http://

www.qualityforum.org/Setting_

Priorities/Partnership/MAP_Final_

Reports.aspx. 

We are proposing that data collection 

for this measure continue to occur 

through the LTCH CARE Data Set 

submitted through the CMS Quality 

Improvement and Evaluation System 

(QIES) Assessment Submission and 

Processing (ASAP) system. LTCHs have 

been submitting data on the Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) measure 

through the LTCH CARE Data Set since 

October 2012. By building on the 

existing reporting and submission 

infrastructure for LTCHs, we intend to 

minimize the administrative burden 

related to data collection and 

submission for this measure under the 

LTCH QRP. For more information on 

LTCH QRP reporting using the QIES 

ASAP system, we refer readers to our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/

LTCHTechnicalInformation.html. 

We are proposing that data collected 

using standardized items through the 

LTCH CARE Data Set would continue to 

be used to calculate this quality 

measure. LTCH CARE Data Set items 

used to identify new or worsened 

pressure ulcers consist of: M0800A 

(Worsening in Pressure Ulcer Status 

Since Prior Assessment, Stage 2); 

M0800B (Worsening in Pressure Ulcer 

Status Since Prior Assessment, Stage 3); 

and M0800C (Worsening in Pressure 

Ulcer Status Since Prior Assessment, 

Stage 4). In addition, we are proposing 

to continue to use items from the LTCH 

CARE Data Set to risk-adjust this quality 

measure. These items consist of: 

GG0160C206 (Functional Mobility; 

Lying to Sitting on Side of Bed), H0400 

(Bowel Continence); I0900 (Peripheral 

Vascular Disease (PVD) or Peripheral 

Arterial Disease (PAD); I2900 (Diabetes 

Mellitus), K0200A (Height); and K0200B 

(Weight). More information about the 

LTCH CARE Data Set items is available 

in the LTCH QRP Manual available at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

index.html. 

The specifications and data elements 

for the Percent of Residents or Patients 

with Pressure Ulcers That Are New or 

Worsened (Short Stay) (NQF #0678) 

measure for LTCHs are available in the 

LTCH QRP Manual at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

index.html. 

We are inviting public comment on 

our proposal to adopt the Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678) measure for 

the FY 2018 payment determination and 

subsequent years to fulfill the 

requirements of the IMPACT Act of 

2014. 

c. Proposal To Address the IMPACT Act 

of 2014: Quality Measure Addressing 

the Domain of Incidence of Major Falls: 

Application of Percent of Residents 

Experiencing One or More Falls With 

Major Injury (Long Stay) (NQF #0674) 

Section 1899B of the Act directs the 

Secretary to specify quality measures on 

which PAC providers are required 

under the applicable reporting 

provisions to submit standardized 

patient assessment data and other 

necessary data specified by the 

Secretary with respect to five quality 

domains, one of which is the incidence 

of major falls. The specified application 

date by which the Secretary must 

specify quality measures to address this 

domain for IRFs, SNFs, and LTCHs is 

October 1, 2016, and for HHAs is 

January 1, 2019. To satisfy these 

requirements, we are proposing to adopt 

an application of the Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674) measure in the LTCH QRP 

as a cross-setting quality measure that 

addresses the domain of incidence of 

major falls. The purpose of our proposal 

is to establish this measure’s use as a 

cross-setting measure that satisfies the 

required adoption of such a measure 

under the domain of falls with major 

injury. There is no difference between 

this measure and the measure we 

previously adopted, beyond the 

proposed intent to use the measure to 

satisfy the requirements of the IMPACT 

Act of 2014. Data collection would start 

on April 1, 2016. The reporting of data 

for this measure would affect the 


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payment determination for FY 2018 and 

subsequent years. 

For the LTCH setting, this measure 

would report the percentage of patients 

who experienced one or more falls with 

major injury during the LTCH stay. This 

measure was developed by CMS and is 

NQF-endorsed, currently for long-stay 

residents of nursing facilities. It was 

adopted for the LTCH QRP in the FY 

2014 IPPS/LTCH PPS final rule (78 FR 

50874 through 50877). In the FY 2015 

IPPS/LTCH PPS final rule, we adopted 

a revised start for data collection of 

April 1, 2016 and affecting FY 2018 

payment determination and we adopted 

data collection and submission 

timelines for the FY 2018 payment 

determination and subsequent years. 

For information on the detailed 

rationale for relevance, evidence, 

appropriateness, importance, and 

applicability of this quality measure in 

the LTCH QRP, we refer readers to these 

final rules. 

Measure specifications are available 

on the NQF Web site at: http://

www.qualityforum/QPS/0674. 

The IMPACT Act of 2014 requires the 

implementation of quality measures and 

resource use and other measures that are 

standardized and interoperable across 

PAC settings as well as the reporting of 

standardized patient assessment data 

and other necessary data specified by 

the Secretary. The Percent of Residents 

Experiencing One or More Falls with 

Major Injury (Long Stay) (NQF #0674) 

measure is NQF-endorsed for long-stay 

residents of nursing facilities and has 

been successfully implemented in such 

settings. The NQF-endorsed measure 

has been in use as part of the CMS 

Nursing Home Quality Initiative since 

2011. In addition, the measure is 

currently reported on the CMS Nursing 

Home Compare Web site at: http://

www.medicare.gov/

nursinghomecompare/search.html. As 

noted previously, this measure was 

adopted for use in the LTCH QRP in the 

FY 2014 IPPS/LTCH PPS final rule (78 

FR 50874 through 50877). In the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50290 through 50291), we revised the 

data collection start date for this 

measure with data collection to begin 

starting April 1, 2016, and we adopted 

data collection and submission 

timelines for the FY 2018 payment 

determination and subsequent years. 

We reviewed the NQF’s consensus 

endorsed measures and did not identify 

any NQF-endorsed cross-setting quality 

measures focused on falls with major 

injury applicable to multiple post-acute 

care settings. We are unaware of any 

other cross-setting quality measures for 

falls with major injury that have been 

endorsed or adopted by another 

consensus organization. Therefore, we 

are proposing an application of the 

measure, the Percent of Residents 

Experiencing One or More Falls with 

Major Injury (Long Stay) (NQF #0674) 

measure under the Secretary’s authority 

to select non-NQF-endorsed measure. 

A TEP convened by our measure 

development contractor provided input 

on the measure specifications, as well as 

the feasibility and clinical 

appropriateness of implementing the 

measure across post-acute care settings, 

including the LTCH setting. The TEP 

supported the implementation of this 

measure across post-acute care settings 

and also supported CMS’ efforts to 

standardize this measure for crosssetting development. In addition, the 

MAP met on February 9, 2015, and 

provided input to CMS on the measure. 

The MAP conditionally supported the 

use of an application of the Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674) measure in the LTCH QRP 

as a cross-setting quality measure. More 

information about the MAP’s 

recommendations for this measure is 

included in The MAP Off-Cycle 

Deliberations 2015: Measures under 

Consideration to Implement Provisions 

of the IMPACT Act: Final Report which 

is available at: 

http://www.qualityforum.org/Setting_

Priorities/Partnership/MAP_Final_

Reports.aspx. 

More information on the Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674) measure can be found on 

the NQF Web site at: http://

www.qualityforum.org/QPS/0674. 

Updated specifications and details 

regarding the changes made to further 

harmonize this measure across postacute care settings are located at: http:// 

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

index.html. 

We are proposing that data for this 

proposed quality measure be collected 

using the LTCH CARE Data Set, with 

submission through the QIES ASAP 

system. For more information on LTCH 

QRP reporting through the QIES ASAP 

system, we refer readers to the CMS 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/

LTCHTechnicalInformation.html. Data 

collected through a revised LTCH CARE 

Data Set would be used to calculate this 

quality measure. Consistent with the 

LTCH CARE Data Set reporting 

requirements, the application of the 

Percent of Residents Experiencing One 

or More Falls with Major Injury (Long 

Stay) (NQF #0674) measure would 

apply to all patients discharged from 

LTCHs. Data items in the revised LTCH 

CARE Data Set Version 3.00 would 

include: J1800, Any Falls Since 

Admission; and J1900, Number of Falls 

Since Admission. 

The calculation of the proposed 

application of the measure would be 

based on item J1900C, Number of Falls 

with Major Injury Since Admission. The 

measure specifications for the Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674) measure are available at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

index.html. We refer readers to section 

VIII.C.9.b. of the preamble of this 

proposed rule for more information on 

the data collection and submission 

timeline for this proposed quality 

measure. 

We are inviting public comment on 

our proposal to adopt an application of 

the Percent of Residents Experiencing 

One or More Falls with Major Injury 

(Long Stay) (NQF #0674) measure, with 

data collection beginning on April 1, 

2016 for the FY 2018 payment 

determination and subsequent years to 

fulfill the requirements in the IMPACT 

Act of 2014. 

d. Proposal To Address the IMPACT Act 

of 2014: Quality Measure Addressing 

the Domain of Functional Status, 

Cognitive Function, and Changes in 

Function and Cognitive Function: 

Application of Percent of LTCH Patients 

With an Admission and Discharge 

Functional Assessment and a Care Plan 

That Addresses Function (NQF #2631; 

Under NQF review) 

Section 1899B(c)(1) of the Act directs 

the Secretary to specify quality 

measures on which PAC providers are 

required under the applicable reporting 

provisions to submit standardized 

patient assessment data and other 

necessary data specified by the 

Secretary with respect to five quality 

domains, one of which is functional 

status, cognitive function, and changes 

in function and cognitive function. The 

specified application date by which the 

Secretary must specify quality measures 

to address this domain for IRFs and 

SNFs is October 1, 2016, for LTCHs is 

October 1, 2018, and for HHAs is 

January 1, 2019. To satisfy these 

requirements, we are proposing to adopt 

an application of the Percent of LTCH 

Patients with an Admission and 

Discharge Functional Assessment and a 

Care Plan that Addresses Function (NQF 


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207Subcommittee on Health National Committee 

on Vital Statistics, ‘‘Classifying and Reporting 

Functional Status’’ (2001). 

208Reistetter TA, Graham JE, Granger CV, Deutsch 

A, Ottenbacher KJ.: Utility of Functional Status for 

Classifying Community Versus Institutional 

Discharges after Inpatient Rehabilitation for Stroke. 

Archives of Physical Medicine and Rehabilitation, 

2010; 91:345–350. 

209Miller EA, Weissert WG.: Predicting Elderly 

People’s Risk for Nursing Home Placement, 

Hospitalization, Functional Impairment, and 

Mortality: A Synthesis. Medical Care Research and 

Review, 57; 3: 259–297. 

210 Kurz, A. E., Saint-Louis, N., Burke, J. P., & 

Stineman, M. G.: Exploring the personal reality of 

disability and recovery: a tool for empowering the 

rehabilitation process. Qual Health Res, 18(1), 90– 

105 (2008). 

211 Kramer, A. M. (1997). Rehabilitation care and 

outcomes from the patient’s perspective. Med Care, 

35(6 Suppl), JS48–57. 

212Stineman, M. G., Rist, P. M., Kurichi, J. E., & 

Maislin, G.: Disability meanings according to 

patients and clinicians: imagined recovery choice 

pathways. Quality of Life Research, 18(3), 389–398 

(2009). 

213 Kortebein P, Ferrando A, Lombebeida J, Wolfe 

R, Evans WJ.: Effect of 10 days of bed rest on 

skeletal muscle in health adults. JAMA; 

297(16):1772–4. 

214Ellenbecker CH, Samia L, Cushman MJ, Alster 

K: Patient safety and quality in home health care. 

Patient Safety and Quality: An Evidence-Based 

Handbook for Nurses. Vol 1. 

215 Kresevic DM.: Assessment of physical 

function. In: Boltz M, Capezuti E, Fulmer T, 

Zwicker D, editor(s). Evidence-based geriatric 

nursing protocols for best practice. 4th ed. New 

York (NY): Springer Publishing Company; 2012. p. 

89–103. 

216Barbara Gage et al: ‘‘The Development and 

Testing of the Continuity Assessment Record and 

Evaluation (CARE) Item Set: Final Report on the 

Development of the CARE Item Set’’ (RTI, 

International, 2012). 

#2631; under NQF review) measure that 

we have already adopted in the LTCH 

QRP as a cross-setting quality measure 

that addresses the domain of functional 

status, cognitive function, and changes 

in function and cognitive function. The 

reporting of data for this measure would 

affect the payment determination for FY 

2018 and subsequent years. This quality 

measure reports the percent of patients 

with both an admission and a discharge 

functional assessment and a goal that 

addresses function. 

The National Committee on Vital and 

Health Statistics, Subcommittee on 

Health,207 noted: ‘‘[i]nformation on 

functional status is becoming 

increasingly essential for fostering 

healthy people and a healthy 

population. Achieving optimal health 

and well-being for Americans requires 

an understanding across the life span of 

the effects of people’s health conditions 

on their ability to do basic activities and 

participate in life situations, in other 

words, their functional status.’’ This 

statement is supported by research 

showing that patient functioning is 

associated with important patient 

outcomes such as discharge destination 

and length of stay in inpatient 

settings,208 as well as the risk of nursing 

home placement and hospitalization of 

older adults living in the community.209

Functioning is important to patients and 

their family members.210 211 212

The majority of patients who receive 

post-acute care services, such as care 

provided by SNFs, HHAs, IRFs and 

LTCHs, have functional limitations, and 

many of these patients are at risk for 

further decline in function due to 

limited mobility and ambulation.213 The 

patient and resident populations treated 

by SNFs, HHAs, IRFs and LTCHs vary 

in terms of their functional abilities at 

the time of the post-acute care 

admission and their goals of care. For 

IRF patients and many SNF residents, 

treatment goals may include fostering 

the patient’s ability to manage his or her 

daily activities so that the patient can 

complete self-care and/or mobility 

activities as independently as possible, 

and, if feasible, return to a safe, active, 

and productive life in a communitybased setting. For HHA patients, 

achieving independence within the 

home environment and promoting 

community mobility may be the goal of 

care. For other HHA patients, the goal 

of care may be to slow the rate of 

functional decline in order to allow the 

person to remain at home and avoid 

institutionalization.214

Lastly, in addition to having complex 

medical care needs for an extended 

period of time, LTCH patients often 

have limitations in functioning because 

of the nature of their conditions, as well 

as deconditioning due to prolonged bed 

rest and treatment requirements (for 

example, ventilator use). The clinical 

practice guideline Assessment of 

Physical Function 215 recommends that 

clinicians should document functional 

status at baseline and over time to 

validate capacity, decline, or progress. 

Therefore, assessment of functional 

status at admission and discharge and 

establishing a functional goal for 

discharge as part of the care plan (that 

is, treatment plan) is an important 

aspect of patient care in all of these 

post-acute care settings. 

Given the variation in patient and 

resident populations across the postacute care settings, the functional 

activities that are typically assessed by 

clinicians for each type of post-acute 

care provider may vary. For example, 

the activity of rolling left and right in 

bed is an example of a functional 

activity that may be most relevant for 

low-functioning patients or residents 

who are chronically critically ill. 

Managing a full flight of stairs may be 

assessed for higher functioning patients 

or residents. However, certain 

functional activities, such as eating, oral 

hygiene, lying down in to sitting on the 

side of the bed, toilet transfers, and 

walking or wheelchair mobility are 

important activities for patients in each 

post-acute care setting. 

Although functional assessment data 

are currently collected by SNFs, HHAs, 

IRFs and LTCHs, this data collection has 

employed different assessment 

instruments, scales, and item 

definitions. The data collected cover 

similar topics, but are not standardized 

across PAC settings. Further, the 

different sets of functional assessment 

items are coupled with different rating 

scales, making communication about 

patient functioning challenging when 

patients transition from one type of 

setting to another. Collection of 

standardized functional assessment data 

across SNFs, HHAs, IRFs and LTCHs, 

using common data items, would 

establish a common language for patient 

functioning, which may facilitate 

communication and care coordination 

as patients transition from one type of 

provider to another. The collection of 

standardized functional status data may 

also help improve patient or resident 

functioning during an episode of care by 

ensuring that basic daily activities are 

assessed at the start and end of each 

episode of care with the aim of 

determining whether at least one 

functional goal has been established. 

The functional assessment items 

included in the proposed functional 

status quality measure were originally 

developed and tested as part of the PostAcute Care Payment Reform 

Demonstration (PAC–PRD) version of 

the Continuity Assessment Record and 

Evaluation (CARE) Item Set, which was 

designed to standardize the assessment 

of patients’ status across acute care and 

post-acute care settings, including SNFs, 

HHAs, IRFs and LTCHs. The functional 

status items on the CARE Item Set are 

daily activities that clinicians typically 

assess at the time of admission and/or 

discharge in order to determine patients’ 

or residents’ needs, evaluate patient 

progress and prepare patients or 

residents and families for a transition to 

home or to another setting. 

The development of the CARE Item 

Set and a description and rationale for 

each item is described in a report 

entitled ‘‘The Development and Testing 

of the Continuity Assessment Record 

and Evaluation (CARE) Item Set: Final 

Report on the Development of the CARE 

Item Set: Volume 1 of 3.’’ 216 Reliability 

and validity testing were conducted as 

part of CMS’ Post-Acute Care Payment 


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217 Ibid. 

218 Ibid. 

Reform Demonstration, and we 

concluded that the functional status 

items have acceptable reliability and 

validity. A description of the testing 

methodology and results are available in 

several reports, including the report 

entitled ‘‘The Development and Testing 

of the Continuity Assessment Record 

And Evaluation (CARE) Item Set: Final 

Report On Reliability Testing: Volume 2 

of 3’’ 217 and the report entitled ‘‘The 

Development and Testing of The 

Continuity Assessment Record And 

Evaluation (CARE) Item Set: Final 

Report on Care Item Set and Current 

Assessment Comparisons: Volume 3 of 

3.’’ 218 The reports are available on our 

Post-Acute Care Quality Initiatives Web 

page at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/CARE-Item-Set-and-BCARE.html. 

The cross-setting function quality 

measure we are proposing to adopt for 

the FY 2018 payment determination and 

subsequent years to meet the IMPACT 

Act of 2014 requirements is a process 

measure that is an application of the 

Percent of LTCH Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function measure (NQF 

#2631; under NQF review). This quality 

measure was developed by the CMS. It 

reports the percent of patients with both 

an admission and a discharge functional 

assessment and a treatment goal that 

addresses function. The treatment goal 

provides documentation that a care plan 

with a goal has been established for the 

patient. 

We are proposing to use the data that 

will be collected and submitted using 

the LTCH CARE Data Set Version 3.00 

for the Percent of LTCH Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function measure (NQF 

#2631; under NQF review) measure 

starting April 1, 2016 in order to 

calculate this cross-setting application 

of the Percent of LTCH Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function measure (NQF 

#2631; under NQF review) quality 

measure. The items in the cross-setting 

application of the Percent of LTCH 

Patients with an Admission and 

Discharge Functional Assessment and a 

Care Plan That Addresses Function 

measure (NQF #2631; under NQF 

review) are a subset of the items 

included in the Percent of LTCH 

Patients with an Admission and 

Discharge Functional Assessment and a 

Care Plan That Addresses Function 

measure (NQF #2631; under NQF 

review), which was finalized in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50291 through 50298). Therefore, the 

adoption of this quality measure to 

satisfy the requirements of the IMPACT 

Act of 2014 would not result in the 

addition of new items to the LTCH 

CARE Data Set Version 3.00 and, 

therefore, would not result in additional 

burden for data collection and data 

submission to LTCHs. 

This process measure requires the 

collection of functional status admission 

and discharge assessment data using 

standardized clinical assessment items, 

or data elements, that assess specific 

functional activities, that is, self-care, 

mobility activities. The self-care and 

mobility function activities on the LTCH 

CARE Data Set Version 3.00 are coded 

using a 6-level rating scale that indicates 

the patient’s level of independence with 

the activity; higher scores indicate more 

independence. For this quality measure, 

documentation of a goal for one of the 

function items reflects that the patient’s 

care plan addresses function. The 

function goal is recorded at admission 

for at least one of the standardized selfcare or mobility function items using 

the 6-level rating scale. 

To the extent that a patient had an 

incomplete stay (for example, for the 

purpose of being admitted to an acute 

care facility), collection of discharge 

functional status data might not be 

feasible. Therefore, for patients with 

incomplete stays, admission functional 

status data and at least one treatment 

goal would be required; however, 

discharge functional status data would 

not be required to be reported. 

A TEP convened by our measure 

development contractor provided input 

on the technical specifications of this 

quality measure, as well as the 

feasibility of implementing the measure 

across post-acute care settings, 

including the LTCH setting. The TEP 

supported the implementation of this 

measure across post-acute care settings 

and also supported our efforts to 

standardize this measure for crosssetting use. 

In addition, the MAP met on February 

9, 2015, and provided input to CMS on 

the measure. The MAP conditionally 

supported the use of an application of 

the Percent of LTCH Patients With an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function measure (NQF 

#2631; under NQF review) for use in the 

LTCH QRP as the cross-setting measure. 

The conditions stated by the MAP 

included that the measure should be 

endorsed by the NQF. Finally, the MAP 

reiterated its support for adding 

measures addressing function, noting 

the group’s special interest in this PAC/ 

LTC core concept. More information 

about the MAP’s recommendations for 

this measure is discussed in The MAP 

Off-Cycle Deliberations 2015: Measures 

under Consideration to Implement 

Provisions of the IMPACT Act: Final 

Report which is available at: http://

www.qualityforum.org/Setting_

Priorities/Partnership/MAP_Final_

Reports.aspx. 

The measure we are proposing is an 

application of the Percent of Long-Term 

Care Hospital Patients With an 

Admission and Discharge Functional 

Assessment and a Care Plan that 

Addresses Function (NQF #2631), 

which is under NQF review for 

consideration of endorsement. The 

proposed measure is derived from the 

Percent of Long-Term Care Hospital 

Patients With an Admission and 

Discharge Functional Assessment and a 

Care Plan that Addresses Function 

quality measure. The specifications are 

available for review at the LTCH QRP 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingMeasures-Information.html. 

We reviewed the NQF’s consensus 

endorsed measures and were unable to 

identify any NQF-endorsed cross-setting 

quality measures focused on assessment 

of function for post-acute care patients. 

We are also unaware of any other crosssetting quality measures for functional 

assessment that have been endorsed or 

adopted by another consensus 

organization. Therefore, we are 

proposing to adopt this functional 

assessment measure for use in the LTCH 

QRP for the FY 2018 payment 

determination and subsequent years 

under the Secretary’s authority to select 

non-NQF-endorsed measures. 

As discussed previously, we are 

proposing that this cross-setting quality 

measure use a subset of data collected 

for Percent of LTCH Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function (NQF #2631; under 

NQF review) using the LTCH CARE 

Data Set, with submission through the 

QIES ASAP system. For more 

information on LTCH QRP reporting 

through the QIES ASAP system, we 

refer readers to the CMS Web site at: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

LTCHTechnicalInformation.html. 

The measure calculation algorithm is: 


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Step 1. For each LTCH stay, the 

records of patients discharged during 

the 12-month target time period are 

identified and counted. This count is 

the denominator. 

Step 2. The records of patients with 

complete stays are identified, and the 

number of these patient stays with 

complete admission functional 

assessment data and at least one selfcare or mobility activity goal and 

complete discharge functional 

assessment data is counted. 

Step 3. The records of patients with 

incomplete stays are identified, and the 

number of these patient records with 

complete admission functional status 

data and at least one self-care or 

mobility goal is counted. 

Step 4. The counts from Step 2 

(complete LTCH stays) and Step 3 

(incomplete LTCH stays) are summed. 

The sum is the numerator count. 

Step 5. The numerator count is 

divided by the denominator count to 

calculate this quality measure. 

This measure is calculated at two 

points in time, at admission and 

discharge (we refer readers to section 

VIII.C.9.b. of the preamble of this 

proposed rule, Form, Manner and 

Timing of Quality data Submission, for 

more information on the proposed data 

collection and submission timeline for 

this proposed quality measure). 

The items would assess specific selfcare and mobility activities, and would 

be based on functional items included 

in the Post-Acute Care Payment Reform 

Demonstration version of the CARE Item 

Set. The items have been developed and 

tested for reliability and validity in 

SNFs, HHAs, IRFs, and LTCHs. More 

information pertaining to item testing is 

available on our Post-Acute Care 

Quality Initiatives Web page at: http:// 

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/Post-Acute-Care-QualityInitiatives/CARE-Item-Set-and-BCARE.html. 

We are inviting public comments on 

our proposal to adopt the application of 

the Percent of LTCH Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function measure (NQF 

#2631; under NQF review) that we have 

already adopted in the LTCH QRP as a 

cross-setting quality measure that 

addresses the domain of functional 

status, cognitive function, and changes 

in function and cognitive function to 

satisfy the requirement of the IMPACT 

Act of 2014, with data collection 

starting on April 1, 2016 for the FY 2018 

payment determination and subsequent 

years. Further, we are inviting public 

comments on our proposal to use a 

subset of data collected for the Percent 

of LTCH Patients with an Admission 

and Discharge Functional Assessment 

and a Care Plan That Addresses 

Function measure (NQF #2631; under 

NQF review) to meet the requirements 

for this cross-setting quality measure 

that addresses the domain of functional 

status, cognitive function, and changes 

in function and cognitive function to 

satisfy the requirement of the IMPACT 

Act of 2014. 

Lastly, in alignment with the 

requirements of the IMPACT Act of 

2014 to develop quality measures and 

standardize data for comparative 

purposes, we believe that evaluating 

outcomes across the post-acute settings 

using standardized data is an important 

priority. Therefore, in addition to 

proposing a process-based measure for 

the domain in the IMPACT Act of 2014 

of ‘‘Functional status, cognitive 

function, and changes in function and 

cognitive function,’’ which is included 

in this year’s proposed rule, we also 

intend to develop outcomes-based 

quality measures, including functional 

status and other quality outcome 

measures to further satisfy this domain. 

These measures will be proposed in 

future rulemaking in order to assess 

functional change for each care setting 

as well as across care settings. 

7. LTCH QRP Quality Measures for the 

FY 2019 Payment Determination and 

Subsequent Years 

At this time, we are not proposing any 

additional LTCH QRP quality measures 

for the FY 2019 payment determination 

and subsequent years. Under our policy 

discussed in section VIII.C.3. of the 

preamble of this proposed rule, we will 

retain all previously adopted quality 

measures and, if finalized, the 

additional measures proposed in this 

rule for the FY 2019 payment 

determination and subsequent years. 

8. LTCH QRP Quality Measures and 

Concepts Under Consideration for 

Future Years 

We are inviting public comments on 

importance, relevance, appropriateness, 

and applicability of each of the quality 

measures and quality measure concepts 

listed in the table below for future years 

in the LTCH QRP. Specifically, we are 

inviting public comments regarding the 

clinical importance to the LTCH patient 

population and the feasibility of data 

collection and implementation in the 

LTCH setting for these measures and 

measure concepts in order to inform and 

improve quality of care delivered to 

LTCH patients. 

FUTURE MEASURES AND MEASURE

CONCEPTS UNDER CONSIDERATION

FOR THE LTCH QRP 

National Quality Strategy (NQS) Priority: 

Patient Safety: 

Ventilator Weaning (Liberation) Rate 

Compliance with ventilator process Elements during LTCH Stay 

Venous Thromboembolism Prophylaxis 

Medication Reconciliation.* 

NQS Priority: Effective Communication 

and Coordination of Care: 

Transfer of health information and care 

preferences when an individual transitions.* 

All-Condition Risk-Adjusted Potentially 

Preventable Hospital Readmission 

Rate.* 

NQS Priority: Patient- and Caregiver-Centered Care: 

Discharge to community.* 

Patient Experience of Care 

Percent of Patients with Moderate to Severe Pain 

Advance Care Plan 

NQS Priority: Affordable Care: 

Medicare Spending per Beneficiary.* 

* Indicates that this is a cross-setting measure domain listed in the IMPACT Act of 2014. 

9. Form, Manner, and Timing of Quality 

Data Submission for the FY 2016 

Payment Determination and Subsequent 

Years 

a. Background 

Section 1886(m)(5)(C) of the Act 

requires that, for the FY 2014 payment 

determination and subsequent years, 

each LTCH submit to the Secretary data 

on quality measures specified by the 

Secretary. In addition, section 

1886(m)(5)(F) of the Act requires that, 

for the fiscal year beginning on the 

specified application date, as defined in 

section 1899B of the Act, and each 

subsequent year, each LTCH submit to 

the Secretary data on measures specified 

by the Secretary under section 1899B of 

the Act. The data required under section 

1886(m)(5)(C) and (F) of the Act must be 

submitted in a form and manner, and at 

a time, specified by the Secretary. As 

required by section 1886(m)(5)(A)(i) of 

the Act, for any LTCH that does not 

submit data in accordance with section 

1886(m)(5)(C) of the Act with respect to 

a given rate year, any annual update to 

the standard Federal rate for discharges 

for the LTCH during the rate year must 

be reduced by 2 percentage points. 

In the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50857 through 50861 and 

50878 through 50881), we finalized the 

data submission timelines and 

submission deadlines for measures for 

the FY 2016 and FY 2017 payment 

determinations. We refer readers to the 

FY 2014 IPPS/LTCH PPS final rule for 

a more detailed discussion of these 


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timelines and deadlines. Specifically, 

we refer readers to the table at 78 FR 

50878 of the FY 2014 IPPS/LTCH PPS 

final rule for the data collection period 

and submission deadlines for the FY 

2016 payment determination and the 

tables at 78 FR 50881 of that final rule 

for the data collection timelines and 

submission deadlines for the FY 2017 

payment determination. 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50307 through 50311), we: 

• Revised the previously adopted 

data collection period and submission 

deadlines for the Percent of Residents or 

Patients Who Were Assessed and 

Appropriately Given the Seasonal 

Influenza Vaccine (Short Stay) (NQF 

#0680) measure for the FY 2016 

payment determination and subsequent 

years; 

• Adopted data submission 

mechanisms for the FY 2018 payment 

determination and subsequent years for 

new LTCH QRP quality measures and 

for revisions to previously adopted 

quality measures; 

• Adopted data collection periods 

and submission deadlines for certain 

measures under the LTCH QRP for the 

FY 2018 payment determination; 

• Revised data collection timelines 

and submission deadlines for the 

application of the Percent of Residents 

Experiencing One or More Falls with 

Major Injury (Long Stay) (NQF #0674) 

measure for the FY 2018 payment 

determination and subsequent years; 

and 

• Adopted data collection timelines 

and submission deadlines under the 

LTCH QRP for the FY 2019 payment 

determination and subsequent years. 

b. Proposed Timing for New LTCHs To 

Begin Reporting Data to CMS for the FY 

2017 Payment Determination and 

Subsequent Years 

Beginning with the FY 2017 payment 

determination, we are proposing that a 

new LTCH be required to begin 

reporting quality data under the LTCH 

QRP by no later than the first day of the 

calendar quarter subsequent to 30 days 

after the date on its CMS Certification 

Number (CCN) notification letter. For 

example, if an LTCH’s CCN notification 

letter is dated March 15, then the LTCH 

would be required to begin reporting 

quality data to CMS beginning on July 

1 (March 15 + 30 days = April 14 

(quarter 2)). The LTCH would be 

required to begin collecting quality data 

on the first day of the quarter 

subsequent to quarter 2, which is 

quarter 3, or July 1. The collection of 

quality data would begin on the first day 

of the calendar year quarter identified as 

the start date, and would include all 

LTCH admissions and subsequent 

discharges beginning on, and 

subsequent to, that day; however, 

submission of quality data would be 

required by previously finalized or 

newly proposed quarterly deadlines. In 

order to determine which quality 

measure data an LTCH would need to 

begin submitting, we refer readers to 

section VIII.C.9.c. of the preamble of 

this proposed rule, below, as it will vary 

depending upon the timing of the CY 

quarter identified as a start date. We 

also are proposing to codify this 

requirement for the timing of new 

LTCHs to begin reporting for purposes 

of the LTCH QRP at new proposed 

§ 412.560(a). We are inviting public 

comment on our proposals to add and 

codify this requirement for the timing of 

new LTCHs to begin reporting for 

purposes of the LTCH QRP. 

c. Proposed Revisions to Previously 

Adopted Data Submission Timelines 

Under the LTCH QRP for the FY 2017 

and FY 2018 Payment Determinations 

and Subsequent Years and Proposed 

Data Collection and Data Submission 

Timelines for Quality Measures 

Proposed in This Proposed Rule 

In the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53636 through 53637), we 

finalized new quarterly quality data 

submission deadlines for LTCHs. We 

contracted the deadlines from the 

original 4.5-month post-CY quarter 

submission deadlines, to 1.5 month 

(approximately 45 days) deadlines. In 

order to align the data submission and 

correction deadlines with the IRF QRP 

and Hospital IQR Program as we near 

public reporting, and to meet the 

requirements of the IMPACT Act of 

2014, we are proposing to revise the 

data submission and correction 

deadlines for quality measures 

previously adopted for the LTCH QRP 

for the FY 2017 and FY 2018 payment 

determinations and subsequent years. 

We are proposing to adopt new 

deadlines that allow 4.5 months 

(approximately 135 days) after the end 

of each calendar year quarter for quality 

data submission, beginning with quarter 

4 2015 (October 2015 through December 

2015). Under this new policy, LTCHs 

will have approximately 135 days 

following the end of each calendar year 

quarter, during which to submit, review, 

and correct their quality data for that CY 

quarter. We also are proposing data 

collection and data submission 

timelines for quality measures that we 

are proposing for the FY 2018 payment 

determination and subsequent years. 

Further, for the measures proposed in 

this proposed rule—Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678), the 

application of Percent of Residents 

Experiencing One or More Falls with 

Major Injury (Long Stay) (NQF #0674), 

and the application of Percent of LTCH 

Patients with an Admission and 

Discharge Functional Assessment and a 

Care Plan That Addresses Function 

(NQF #2631)—we are proposing that the 

data collection and data submission 

timelines align with the proposed data 

collection and data submission 

timelines for each respective measure 

starting with April 1, 2016. Because the 

All-Cause Unplanned Readmission 

Measure for 30 Days Post Discharge 

from LTCHs (NQF #2512) is a Medicare 

FFS claims-based measure, the data 

collection and submission timelines are 

not applicable to this measure. 

The tables below present the data 

collection period and data submission 

timelines for quality measures affecting 

the FY 2017 payment determination, as 

well as the revisions to the data 

collection period and data submission 

timelines for quality measures for the 

FY 2018 payment determination and 

subsequent years. 

DETAILS ON DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR QUALITY MEASURES AFFECTING THE FY 

2017 PAYMENT DETERMINATION

Quality measure NQF ID# Submission method Data collection period Proposed data submission deadlines 

APU determination affected 

Percent of Residents or Patients with Pressure 

Ulcers That Are New or Worsened (Short 

Stay).

#0678 ........ LTCH CARE Data Set/

QIES ASAP.

1/1/15–3/31/15, 4/1/15– 

6/30/15, 7/1/15–9/30/

15, 10/01/15–12/31/

15.

5/15/15 (Q1), 8/15/15 

(Q2), 11/15/15 (Q3), 

Proposed 5/15/16 

(Q4).

FY 2017. 

NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure.#0138 ........ CDC NHSN.

NHSN Central-Line Associated Bloodstream Infections (CLABSI) Outcome Measure.#0139.


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DETAILS ON DATA COLLECTION PERIOD AND DATA SUBMISSION TIMELINE FOR QUALITY MEASURES AFFECTING THE FY 

2017 PAYMENT DETERMINATION—Continued 

Quality measure NQF ID# Submission method Data collection period Proposed data submission deadlines 

APU determination affected 

NHSN Facility-wide Inpatient Hospital-onset 

Methicillin-resistant Staphylococcus aureus 

(MRSA) Bacteremia Outcome Measure.

#1716.

NHSN Facility-wide Inpatient Hospital-onset 

Clostridium difficile Infection (CDI) Outcome 

Measure.

#1717.

All-Cause Unplanned Readmission Measure for 

30 Days Post Discharge from Long Term 

Care Hospitals*.

#2512 ........ Medicare FFS Claims 

Data.

N/A ............................... N/A ............................... For future public reporting. 

* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure and LTCHs do not report additional data to 

CMS. 

DETAILS ON DATA COLLECTION AND SUBMISSION TIMELINE FOR QUALITY MEASURES AFFECTING THE FY 2018 PAYMENT

DETERMINATION AND SUBSEQUENT YEARS

Quality measure NQF ID# Submission method Data collection period Proposed data submission deadlines 

APU determination affected 

Percent of Residents or Patients with Pressure 

Ulcers That Are New or Worsened (Short 

Stay).

#0678 ........ LTCH CARE Data Set/

QIES ASAP.

1/1/16–3/31/16, 4/1/16– 

6/30/16, 7/1/16–9/30/

16, 10/01/16–12/31/

16; Quarterly for 

each subsequent calendar year.

8/15/16 (Q1), 11/15/16 

(Q2), 2/15/17 (Q3), 

5/15/17 (Q4); Approximately 135 days 

after the end of each 

quarter.

FY 2018; Subsequent 

Years. 

NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure.#0138 ........ CDC NHSN.

NHSN Central-Line Associated Bloodstream Infections (CLABSI) Outcome Measure.#0139.

NHSN Facility-wide Inpatient Hospital-onset 

Methicillin-resistant Staphylococcus aureus 

(MRSA) Bacteremia Outcome Measure.

#1716.

NHSN Facility-wide Inpatient Hospital-onset 

Clostridium difficile Infection (CDI) Outcome 

Measure.

#1717.

Percent of Residents or Patients Who Were 

Assessed and Appropriately Given the Seasonal Influenza Vaccine.

#0680 ........ LTCH CARE Data Set/

QIES ASAP.

10/1/15–12/31/15, 1/1/

16–3/31/16, 10/1–12/

31, 1/1–3/31 for subsequent years.

5/15/16, 8/15/16, 5/15, 

8/15 for subsequent 

years.

FY 2018; Subsequent 

Years. 

Influenza Vaccination Coverage among 

Healthcare Personnel.

#0431 ........ CDC NHSN ................. 10/1/15 (or when vaccine becomes available)–3/31/16, 10/1 

(or when vaccine becomes available)–3/

31.

8/15/16, 8/15 for subsequent years.FY 2018; Subsequent 

Years. 

All-Cause Unplanned Readmission Measure for 

30 Days Post Discharge from Long Term 

Care Hospitals.* 

#2512 ........ Medicare FFS Claims 

Data.

N/A ............................... N/A ............................... For future public reporting. 

Application of Percent of Residents Experiencing One or More Falls with Major Injury 

(Long Stay).

#0674 ........ LTCH CARE Data Set/

QIES ASAP.

4/1/16–6/30/16, 7/1/16– 

9/30/16, 10/1/16–12/

31/16; Quarterly for 

each subsequent calendar year.

11/15/16 (Q2), 2/15/17 

(Q3), 5/15/17 (Q4).

FY 2018; Subsequent 

Years. 

Percent of Long-Term Care Hospital Patients 

with an Admission and Discharge Functional 

Assessment and a Care Plan That Addresses Function.

#2631 

(Under 

NQF review).

Change in Mobility Among Long-Term Care 

Hospital Patients Requiring Ventilator Support.

#2632 

(Under 

NQF review).

...................................... ...................................... Quarterly approximately 135 days 

after the end of each 

quarter for subsequent years.

Ventilator Associated Event ............................... N/A ............ CDC NHSN ................. 1/1/16–3/31/16, 4/1/16– 

6/30/16, 7/1/16–9/30/

16, 10/1/16–12/31/

16; Quarterly for 

each subsequent calendar year.

8/15/16 (Q1), 11/15/16 

(Q2), 2/15/17 (Q3), 

5/15/17 (Q4); Quarterly approximately 

135 days after the 

end of each quarter 

for each subsequent 

year.

FY 2018; Subsequent 

Years. 


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DETAILS ON DATA COLLECTION AND SUBMISSION TIMELINE FOR QUALITY MEASURES AFFECTING THE FY 2018 PAYMENT

DETERMINATION AND SUBSEQUENT YEARS—Continued 

Quality measure NQF ID# Submission method Data collection period Proposed data submission deadlines 

APU determination affected 

Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care 

Plan That Addresses Function.

#2631 

(Under 

NQF review).

LTCH CARE Data Set/

QIES ASAP.

4/1/16–6/30/16, 7/1/16– 

9/30/16, 10/1/16–12/

31/16; Quarterly for 

each subsequent calendar year.

11/15/16 (Q2), 2/15/17 

(Q3), 5/15/17 (Q4); 

Quarterly approximately 135 days 

after the end of each 

quarter for subsequent years.

FY 2018; Subsequent 

Years. 

* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure and LTCHs do not report additional data to 

CMS. 

We are inviting public comments on 

our proposals. 

10. Previously Adopted LTCH QRP Data 

Completion Thresholds for the FY 2016 

Payment Determination and Subsequent 

Years 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50311 through 50314), we 

finalized specific LTCH QRP thresholds 

for completeness of LTCH data 

submissions. To ensure that LTCHs are 

meeting an acceptable standard for 

completeness of submitted data, we 

finalized the policy that, beginning with 

the FY 2016 payment determination and 

for each subsequent year, LTCHs must 

meet or exceed two separate data 

completeness thresholds: One threshold 

set at 80 percent for completion of 

quality measures data collected using 

the LTCH CARE Data Set and submitted 

through the QIES; and a second 

threshold set at 100 percent for quality 

measures data collected and submitted 

using the CDC NHSN. 

In addition, we stated that we would 

apply the same thresholds to all 

measures adopted as the LTCH QRP 

expands and LTCHs report data on the 

finalized measure sets. That is, as we 

finalize new measures through the 

regulatory process, LTCHs will be held 

accountable for meeting the previously 

finalized data completion threshold 

requirements for each measure until 

such time that updated threshold 

requirements are proposed and finalized 

through a subsequent regulatory cycle. 

Further, we finalized the requirement 

that a LTCH must meet or exceed both 

thresholds in order to avoid receiving a 

2-percentage point reduction to their 

annual payment update for a given 

fiscal year, beginning with FY 2016 and 

for all subsequent payment updates. We 

are not proposing any changes to these 

policies. We refer readers to the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50311 

through 50314) for a detailed discussion 

of the finalized data completion 

requirements of the LTCH QRP. 

11. Future LTCH QRP Data Validation 

Process 

Historically, we have built 

consistency and internal validation 

checks into our data submission 

specifications to ensure that the data 

elements of the LTCH CARE Data Set 

assessments conform to requirements 

such as proper format and facility 

information. These internal consistency 

checks are automated and occur during 

the LTCH data entry and submission 

process, and help ensure the integrity of 

the data submitted by LTCHs by 

rejecting submissions or issuing 

warnings when LTCH data contain 

logical inconsistencies. These internal 

consistency checks are referred to as 

‘‘system edits’’ and are further outlined 

in the LTCH Data Submission 

Specifications version 1.01, which are 

available for download on the LTCH 

Quality Reporting Technical 

Information Web page at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

LTCHTechnicalInformation.html. 

Validation is intended to provide 

added assurance of the accuracy of the 

data that will be reported to the public 

as required by sections 1886(m)(5)(E) 

and 1899B(g) of the Act. In the FY 2015 

IPPS/LTCH PPS proposed rule (79 FR 

28275 through 28276), we proposed, for 

the FY 2016 payment determination and 

subsequent years, to validate the data 

elements submitted to CMS for quality 

purposes. We also proposed policies 

regarding the application of the 2- 

percentage point reduction for LTCHs 

that failed to meet the data accuracy 

threshold. 

However, in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50314 through 

50316), we decided to further explore 

suggestions from commenters before 

finalizing the LTCH data validation 

process that we proposed. Therefore, we 

did not finalize the data validation 

proposals. 

At this time, we are continuing to 

explore data accuracy validation 

methods and threshold policies that will 

limit the amount of burden and cost to 

LTCHs, while allowing us to establish 

estimations of the accuracy of LTCH 

QRP data. Therefore, in this proposed 

rule, we are not proposing any new 

policies related to data accuracy 

validation, but we plan to do so in 

future rulemaking cycles. 

12. Proposed Public Display of Quality 

Measure Data for the LTCH QRP 

Section 1886(m)(5)(E) of the Act 

requires the Secretary to establish 

procedures for making the LTCH QRP 

data available to the public. In so doing, 

the Secretary must ensure that LTCHs 

have the opportunity to review any such 

data with respect to the LTCH prior to 

its release to the public. Section 

1899B(g) of the Act requires the 

Secretary to establish procedures for 

making available to the public 

information regarding the performance 

of individual PAC providers with 

respect to the measures required under 

section 1899B of the Act beginning not 

later than 2 years after the applicable 

specified application date. The 

procedures must ensure, including 

through a process consistent with the 

process applied under section 

1886(b)(3)(B)(viii)(VII) of the Act for 

similar purposes, that each PAC 

provider has the opportunity to review 

and submit corrections to the data and 

information that are to be made public 

with respect to the PAC provider prior 

to such data being made public. We are 

proposing to display performance data 

related to the LTCH QRP quality 

measures, as applicable, required by the 

LTCH QRP by fall 2016 on a CMS Web 

site, such as the Hospital Compare Web 

site (http://

www.hospitalcompare.hhs.gov), after a 

30-day preview period. Additional 

information about preview report 

content and delivery will be announced 

on the LTCH QRP Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

index.html. LTCHs would be notified 


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via CMS listservs, CMS mass emails and 

memorandums, LTCH QRP Web site 

announcements and Medicare Learning 

Network announcements regarding the 

release of preview reports, as well as the 

timing of the posting of provider data. 

The Hospital Compare Web site is an 

interactive Web tool that assists 

beneficiaries by providing information 

on hospital quality of care to those who 

need to select a hospital. It further 

serves to encourage beneficiaries to 

work with their hospital to discuss the 

quality of care provided to patients, 

thereby providing an additional 

incentive to hospitals to improve the 

quality of care that they furnish. As we 

have done on some of the other CMS 

Compare Web sites, we will, at some 

point in the future, report public data 

using a quality rating system that gives 

each LTCH a rating of between one and 

five stars. Initially, however, we will not 

use the 5-star methodology, until such 

time that we are publicly reporting a 

sufficient number of quality metrics to 

allow for variation and the 

differentiation among LTCHs using this 

methodology. Decisions regarding how 

the rating system will determine an 

LTCH’s star rating and methods used for 

calculations, as well as a proposed 

timeline for implementation will be 

announced via regular LTCH 

communication channels, including 

listening sessions, memos, email 

notification, provider association calls, 

open door forums, and Web postings. 

The initial display of information 

would contain performance data on four 

quality measures: (1) NHSN CAUTI 

Outcome Measure (NQF #0138); (2) 

NHSN CLABSI Outcome Measure (NQF 

#0139); (3) Percent of Residents or 

Patients with Pressure Ulcers that are 

New or Worsened (Short-Stay) (NQF 

#0678); and (4) All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512). We 

are proposing to publicly report data 

beginning with data collected on these 

measures for the first quarter of 2015, or 

discharges beginning January 1, 2015, 

with exception of the All-Cause 

Unplanned Readmission Measure for 30 

Days Post-Discharge from LTCHs (NQF 

#2512). Rates would be displayed based 

on four (4) rolling quarters of data and 

would use discharges from January 1, 

2015 through December 31, 2015 (CY 

2015), for calculation, with exception of 

the measure All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512). 

With respect to LTCH performance 

related to the All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512), we 

are proposing to publicly report 

readmission rates beginning with 

Medicare FFS claims data for patient 

discharges starting with January 1, 2013. 

Readmission rates will be calculated 

using Medicare FFS claims data for two 

consecutive years (for example, 

readmission rates will be calculated 

using Medicare FFS claims data for 

January 1, 2013 through December 31, 

2014 (CY 2013 and CY 2014)) and 

displayed on a calendar year basis. 

Calculations for the CAUTI and 

CLABSI measures adjust for differences 

in the characteristics of hospitals and 

patients using a Standardized Infection 

Ratio (SIR). The SIR is a summary 

measure that takes into account 

differences in the types of patients that 

a hospital treats. The SIR may take into 

account the type of patient care 

location, laboratory methods, hospital 

affiliation with a medical school, bed 

size of the hospital, patient age, and 

American Society of Anesthesiologists’ 

classification of physical health. It 

compares the actual number of HAIs in 

a facility or State to a national 

benchmark based on previous years of 

reported data and adjusts the data based 

on several factors. A confidence interval 

with a lower and upper limit is 

displayed around each SIR to indicate 

that there is a high degree of confidence 

that the true value of the SIR lies within 

that interval. An SIR with a lower limit 

that is greater than 1.0 means that there 

were more HAIs in a facility or State 

than were predicted, and the facility is 

classified as ‘‘Worse than the U.S. 

National Benchmark.’’ If the SIR has an 

upper limit that is less than 1, the 

facility had fewer HAIs than were 

predicted and is classified as ‘‘Better 

than the U.S. National Benchmark.’’ If 

the confidence interval includes the 

value of 1, there is no statistical 

difference between the actual number of 

HAIs and the number predicted, and the 

facility is classified as ‘‘No Different 

than U.S. National Benchmark.’’ If the 

number of predicted infections is less 

than 1, the SIR and confidence interval 

cannot be calculated. 

Calculations for the Percent of 

Residents or Patients with Pressure 

Ulcers That Are New or Worsened 

measure application (NQF #0678) 

would be risk-adjusted. Resident- or 

patient-level covariate risk adjustment is 

performed. Resident- or patient-level 

covariates are used in a logistic 

regression model to calculate a residentor patient-level expected quality 

measure (QM) score (the probability that 

the resident or patient will evidence the 

outcome, given the presence or absence 

of patient characteristics measured by 

the covariates). Then, an average of all 

resident- or patient-level expected QM 

scores for the facility is calculated to 

create a facility-level expected QM 

score. The final facility-level adjusted 

QM score is based on a calculation 

which combines the facility-level 

expected score and the facility level 

observed score. Additional information 

about the covariates can be found at: 

http://www.qualityforum.org/QPS/0678. 

Finally, calculation for performance 

on the measure All-Cause Unplanned 

Readmission Measure for 30 Days Post 

Discharge from IRFs (NQF #2502) will 

also be risk-adjusted. The risk 

adjustment methodology is available, 

along with the specifications for this 

measure, on our LTCH Quality 

Reporting Measures Information Web 

page at http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

LTCH-Quality-Reporting-MeasuresInformation.html. 

We are currently developing reports 

that will allow providers to view the 

data that is submitted to CMS via the 

QIES ASAP system and the CDC’s 

NHSN (Percent of Residents or Patients 

with Pressure Ulcers That Are New or 

Worsened (Short Stay) (NQF #0678), the 

NHSN CAUTI Outcome Measure (NQF 

#0138) and the NHSN CLABSI Outcome 

Measure (NQF #0139), respectively). 

These reports, although not initially, 

will also include provider performance 

on any currently reported quality 

measure that is calculated based on 

CMS claims data that we plan on 

publicly reporting (All-Cause 

Unplanned Readmission Measure for 30 

Days Post-Discharge from LTCHs (NQF 

#2512)). Although real time results will 

not be available, the report will refresh 

all of the data submitted at least once a 

month. 

We are proposing a process to give 

providers an opportunity to review and 

correct data submitted to the QIES 

ASAP system or to the CDC’s NHSN 

system by utilizing that report. Under 

this proposed process, providers would 

to have the opportunity to review and 

correct data they submit on all 

assessment-based measures. Providers 

can begin submitting data on the first 

admission of any reporting quarter. 

Providers are encouraged to submit data 

early in the submission schedule so that 

they can identify errors and resubmit 

data before the quarterly submission 

deadline. The data would be populated 

into reports that are updated at least 

once a month with all data that have 

been submitted. That report would 

contain the provider’s performance on 

each measure calculated based on 

assessment submissions to the QIES 

ASAP or CDC NHSN system. We believe 

that the submission deadline timeframe, 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24610 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

which we have proposed in this 

proposed rule to extend from the 

current 1.5 month policy to 4.5 months 

beyond the end of each calendar year 

quarter, is sufficient time for providers 

to be able to submit, review data, make 

corrections to the data, and view their 

data. We are proposing that once the 

provider has an opportunity to review 

and correct quarterly data related to 

measures submitted via the QIES ASAP 

or CDC NHSN system, we would 

consider the provider to have been 

given the opportunity to review and 

correct this data. We would not allow 

patient-level data correction after the 

submission deadline or for previous 

years. This is because we must set a 

deadline to ensure timely computation 

of measure rates and payment 

adjustment factors. Before we display 

this information, providers will be 

permitted 30 days to review their 

information as recorded in the QIES 

ASAP or CDC NHSN system. 

We are inviting public comment on 

this proposal. 

In addition to our proposal to publicly 

display LTCH performance data on the 

required quality measures under the 

LTCH QRP, we are also are proposing to 

publish a list of LTCHs that successfully 

meet the reporting requirements for the 

applicable payment determination on 

the LTCH QRP Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. 

We are proposing updating the list after 

reconsideration requests are processed 

on an annual basis. We are proposing to 

codify the policy to publish a list of 

compliant LTCHs on the LTCH QRP 

Web site at new proposed 

§ 412.560(d)(3). 

We are inviting comment on our 

proposal to begin publicly reporting 

LTCH QRP data on quality measures 

required by the LTCH QRP, beginning in 

fall 2016. 

13. Previously Adopted and Proposed 

LTCH QRP Reconsideration and 

Appeals Procedures for the FY 2017 

Payment Determination and Subsequent 

Years 

At the conclusion of each fiscal year 

reporting cycle, we review the data 

received from each LTCH to determine 

if the LTCH met the reporting 

requirements set forth for that reporting 

cycle. LTCHs that are found to be 

noncompliant will receive a reduction 

in the amount of 2 percentage points to 

their annual payment update for the 

applicable fiscal year. In the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50317 

through 50318), we described and 

adopted an updated process that enables 

an LTCH to request a reconsideration of 

our initial noncompliance decision in 

the event that an LTCH believes that it 

was incorrectly identified as being 

subject to the 2-percentage point 

reduction to its annual payment due to 

noncompliance with the LTCH QRP 

reporting requirements for a given 

reporting period. 

We wish to clarify that any LTCH that 

wishes to submit a reconsideration 

request must do so by submitting an 

email to CMS containing all of the 

requirements listed on the LTCH QRP 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Exception-andExtension.html. Email sent to LTCHQRP

Reconsiderations@cms.hhs.gov is the 

only form of submission that will be 

accepted from an LTCH provider 

requesting reconsideration. Any 

reconsideration requests received 

through another channel, including the 

U.S. Postal Service (USPS) or telephone, 

will not be considered as a valid 

reconsideration request. 

We are proposing to continue using 

the LTCH QRP reconsideration and 

appeals procedures that were adopted in 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50317 through 50318) and that 

have been posted on the LTCH QRP 

Web site for the FY 2017 payment 

determination and subsequent years, 

with an exception regarding the way in 

which noncompliant LTCHs are notified 

of this determination. 

Previously, only LTCHs found to be 

noncompliant with the reporting 

requirements set forth for a given 

payment determination received a 

notification of this finding along with 

instructions for requesting 

reconsideration in the form of a certified 

letter via the USPS. In an effort to 

communicate as quickly, efficiently, and 

broadly as possible with LTCHs 

regarding annual compliance, we are 

proposing changes to our 

communications method regarding 

annual notification of reporting 

compliance in the LTCH QRP. In 

addition to sending a letter via regular 

USPS mail, beginning with the FY 2016 

payment determination and for 

subsequent fiscal years, we are 

proposing the QIES as a mechanism to 

communicate to LTCHs regarding their 

compliance with the reporting 

requirements for the given reporting 

cycle. 

We note that all LTCHs have been 

required to use the QIES system in order 

to report on required LTCH QRP 

measures since October 1, 2012. 

Therefore, we are proposing that all 

Medicare-certified LTCH compliance 

letters be uploaded into the QIES for 

each LTCH to access. Instructions to 

download files from QIES may be found 

on the Web site at: https://

www.qtso.com/LTCH.html. We are 

proposing to disseminate 

communications regarding the 

availability of compliance reports in 

LTCHs’ QIES files through routine 

channels to LTCHs and vendors, 

including, but not limited to, issuing 

memos, emails, Medicare Learning 

Network announcements, and notices 

on the LTCH QRP Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. 

The purpose of the compliance letter 

is to notify an LTCH that it has been 

identified as either being compliant or 

noncompliant with the LTCH QRP 

reporting requirements for the given 

reporting cycle. If the LTCH is 

determined to be noncompliant, the 

notification would indicate that the 

LTCH is scheduled to receive a 2 

percentage point reduction to its 

upcoming annual payment update and 

that it may file a reconsideration request 

if it disagrees with this finding. LTCHs 

may request a reconsideration of a 

noncompliance determination through 

the CMS reconsideration request 

process. 

We also are proposing that the 

notifications of our decision regarding 

received reconsideration requests will 

be made available through the QIES. We 

are not proposing to change the process 

or requirements for requesting 

reconsideration, and we refer readers to 

the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50317 through 50318) for a 

discussion of the LTCH QRP 

reconsideration and appeals procedures. 

We also are proposing to publish a list 

of LTCHs that successfully meet the 

reporting requirements for the 

applicable payment determination on 

the LTCH QRP Web site at: http://

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/. 

We are proposing updating the list after 

reconsideration requests are processed 

on an annual basis. 

We are proposing to codify the LTCH 

QRP reconsideration and appeal 

procedures at new proposed 

§ 412.560(d) and (e). 

We are inviting public comment on 

the proposals to change the 

communication mechanism to the QIES 

for the dissemination of compliance 

notifications and reconsideration 

decisions, to publish a list of compliant 

LTCHs on the LTCH QRP Web site, and 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24611 

219Medicare and Medicaid Programs: Electronic 

Health Record Incentive Program—Stage 3; 

proposed rule (80 FR 16731 through 16804) (‘‘EHR 

Incentive Program Stage 3 proposed rule’’). 

220Available at: http://www.cms.gov/Medicare/

Quality-Initiatives-Patient-Assessment-Instruments/

QualityInitiativesGenInfo/CMS-QualityStrategy.html. 

to codify these processes at new 

proposed § 412.560(d)(1) and (d)(3). 

14. Previously Adopted and Proposed 

LTCH QRP Submission Exception and 

Extension Requirements for the FY 2017 

Payment Determination and Subsequent 

Years 

We refer readers to the FY 2014 IPPS/ 

LTCH PPS final rule (78 FR 50883 

through 50885) and the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50316 

through 50317) for a detailed discussion 

of the LTCH QRP Submission Exception 

and Extension requirements. For the FY 

2017 payment determination and 

subsequent years, we are not proposing 

any changes to the LTCH QRP 

requirements that we adopted in these 

final rules. However, we are proposing 

to codify the LTCH QRP Submission 

Exception and Extension Requirements 

at new § 412.560(c) and (d). 

We remind readers that, in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 

50316 through 50317), we stated that 

LTCHs must submit request an 

exception or extension by submitting a 

written request along with all 

supporting documentation to CMS via 

email to the LTCH mailbox at 

LTCHQRPReconsiderations@

cms.hhs.gov. We further stated that 

exception or extension requests sent to 

CMS through any other channel would 

not be considered as a valid request for 

an exception or extension from the 

LTCH QRP’s reporting requirements for 

any payment determination. In order to 

be considered, a request for an 

exception or extension must contain all 

of the requirements as outlined on our 

Web site at: http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/LTCH-QualityReporting/LTCH-Quality-ReportingReconsideration-and-Disaster-WaiverRequests.html. 

We are inviting public comments on 

our proposal to codify the LTCH QRP 

submission exception and extension 

requirements. 

D. Clinical Quality Measurement for 

Eligible Hospitals and Critical Access 

Hospitals Participating in the EHR 

Incentive Programs in 2016 

1. Background 

The HITECH Act (Title IV of Division 

B of the ARRA, together with Title XIII 

of Division A of the ARRA) authorizes 

incentive payments under Medicare and 

Medicaid for the adoption and 

meaningful use of certified electronic 

health record (EHR) technology 

(CEHRT). Eligible hospitals and CAHs 

may qualify for these incentive 

payments under Medicare (as 

authorized under sections 1886(n) and 

1814(l) of the Act, respectively) if they 

successfully demonstrate meaningful 

use of CEHRT, which includes reporting 

on clinical quality measures (CQMs) 

using CEHRT. 

Sections 1886(b)(3)(B) and 1814(l) of 

the Act also establish downward 

payment adjustments under Medicare, 

beginning with FY 2015, for eligible 

hospitals and CAHs that are not 

meaningful users of CEHRT for certain 

associated reporting periods. Section 

1903(a)(3)(F)(i) of the Act establishes 

100 percent Federal financial 

participation (FFP) to States for 

providing incentive payments to eligible 

Medicaid providers (described in 

section 1903(t)(2) of the Act) to adopt, 

implement, upgrade and meaningfully 

use CEHRT. 

Under sections 1886(n)(3)(A) and 

1814(l)(3)(A) of the Act and the 

definition of ‘‘meaningful EHR user’’ 

under 42 CFR 495.4, eligible hospitals 

and CAHs must report on CQMs 

selected by CMS using CEHRT, as part 

of being a meaningful EHR user under 

the Medicare EHR Incentive Program. 

The set of CQMs from which eligible 

hospitals and CAHs will report under 

the EHR Incentive Program beginning in 

FY 2014 is listed in Table 10 of the EHR 

Incentive Program Stage 2 final rule (77 

FR 54083). 

Section 1886(n)(3)(B)(iii) of the Act 

requires that, in selecting measures for 

eligible hospitals and CAHs for the 

Medicare EHR Incentive Program, and 

establishing the form and manner for 

reporting measures, the Secretary shall 

seek to avoid redundant or duplicative 

reporting with reporting otherwise 

required, including reporting under 

section 1886(b)(3)(B)(viii) of the Act, the 

Hospital IQR Program. 

In the EHR Incentive Program Stage 3 

proposed rule 219 (80 FR 16769), to 

further our alignment goal among CMS 

quality reporting programs for eligible 

hospitals and CAHs and avoid 

redundant or duplicative reporting 

among hospital programs, we stated our 

intent to address CQM reporting 

requirements for the Medicare and 

Medicaid EHR Incentive Program for 

eligible hospitals and CAHs for 2016, 

2017, and future years in the IPPS 

rulemaking. We further stated our belief 

that receiving and reviewing public 

comments for various CMS quality 

programs at one time and finalizing the 

requirements for these programs 

simultaneously would allow us to better 

align these programs for eligible 

hospitals and CAHs, allow more 

flexibility into the Medicare and 

Medicaid EHR Incentive Programs, and 

add overall value and consistency by 

providing us the opportunity to address 

public comments that affect multiple 

programs at one time. 

ONC, in its 2015 Edition proposed 

rule (80 FR 16844), also indicated that 

it intends to propose certification policy 

for the reporting of CQMs for eligible 

hospitals and CAHs in or with annual 

IPPS rulemaking to better align with the 

reporting goals of other CMS programs. 

2. CQM Reporting for the Medicare and 

Medicaid EHR Incentive Programs in 

2016 

a. Background 

In the EHR Incentive Program Stage 2 

final rule, we outlined the CQMs 

available for use in the EHR Incentive 

Programs beginning in 2014 for eligible 

hospitals and CAHs in Table 10 at 77 FR 

54083 through 54087, as well as the 

form and method for submission at 77 

FR 54087 through 54089. In this 

proposed rule, for CQM reporting for the 

EHR Incentive Programs in 2016, we are 

proposing to maintain the existing 

requirements established in earlier 

rulemaking for the reporting of CQMs, 

unless indicated otherwise in this 

proposed rule. These requirements 

include reporting on 16 CQMs covering 

at least 3 NQS domains for eligible 

hospitals and CAHs (77 FR 54079). 

As we expand the current measures to 

align with the National Quality Strategy 

and the CMS Quality Strategy 220 and 

incorporate updated standards and 

terminologies in current CQMs, 

including updating the electronic 

specifications for these CQMs, and 

creating de novo CQMs, we plan to 

expand the set of CQMs available for 

reporting under the EHR Incentive 

Programs in CY 2017 and subsequent 

years. We will continue to engage 

stakeholders to provide input on future 

proposals for CQMs as well as 

requesting comment on future electronic 

specifications for new and updated 

CQMs. 

b. Proposed CQM Reporting Period for 

the Medicare and Medicaid EHR 

Incentive Programs in CY 2016 

In the FY 2015 IPPS/LTCH PPS final 

rule (79 FR 50319 through 50321), we 

began to shift CQM reporting to a 

calendar year basis for eligible hospitals 

and CAHs for the Medicare EHR 

Incentive Program. We established that 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24612 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

for eligible hospitals and CAHs that 

submit CQMs electronically in 2015, the 

reporting period is one calendar quarter 

from Q1, Q2, or Q3 of CY 2015 (79 FR 

50321). 

In the EHR Incentive Program Stage 3 

proposed rule, beginning in 2015, we 

proposed to change the definition of 

‘‘EHR reporting period’’ in § 495.4 for 

EPs, eligible hospitals, and CAHs such 

that the EHR reporting period would 

begin and end in relation to a calendar 

year. In connection with that proposal, 

we are proposing that the reporting 

period for CQMs in 2016 for eligible 

hospitals and CAHs for the Medicare 

and Medicaid EHR Incentive Programs 

would also be based on the calendar 

year. We believe it is important to 

continue our goal of aligning the EHR 

Incentive Program with the Hospital 

IQR Program because alignment of these 

programs will serve to reduce hospital 

reporting burden and encourage the 

adoption and meaningful use of CEHRT 

by eligible hospitals and CAHs. 

For 2016 (FY 2018 payment 

determination), the Hospital IQR 

Program is proposing to require 

quarterly reporting and submission 

periods for eCQMs for the 3rd and 4th 

CY quarters. We refer readers to section 

VIII.A.8.b. of the preamble of this 

proposed rule for further discussion of 

the proposals for the Hospital IQR 

Program. We believe it is important for 

us to maintain our goal of alignment 

between the Hospital IQR and EHR 

Incentive Programs. Therefore, we are 

proposing to align the reporting period 

in CY 2016 for eligible hospitals and 

CAHs that report CQMs electronically 

for the Medicare EHR Incentive Program 

with that of the Hospital IQR Program 

and require quarterly reporting and 

submission periods for eCQMs in the 

3rd and 4th CY quarters. 

In addition, in this proposed rule, the 

Hospital IQR Program is proposing to 

change its submission period for eCQMs 

from annual to quarterly submission, 

and proposing to change the submission 

deadline from November 30, 2015 to 

ending 2 calendar months after the close 

of the reporting CY quarter (for CY 

2016/FY 2018 payment determination, 

the proposed deadlines are November 

30, 2016 for Q3 and February 28, 2017 

for Q4). We refer readers to the Hospital 

IQR Program discussion in section 

VIII.A.10.d.(3) of the preamble of this 

proposed rule for more information 

about these proposals. Therefore, to 

coincide with the submission period in 

the Hospital IQR Program, we also are 

proposing to align the Medicare EHR 

Incentive Program submission period 

for CY 2016 with the submission period 

proposed for the Hospital IQR Program. 

We are proposing the following CQM 

reporting periods and submission 

deadlines for eligible hospitals and 

CAHs participating in the Medicare EHR 

Incentive Program in CY 2016: 

• Eligible hospitals and CAHs 

Reporting CQMs by Attestation 

++ For eligible hospitals and CAHs 

demonstrating meaningful use for the 

first time in 2016, any continuous 90- 

day reporting period within CY 2016; or 

one full calendar year reporting period 

for CY 2016. Attestation by February 28, 

2017. 

++ For eligible hospitals and CAHs 

that demonstrated meaningful use in 

any year prior to 2016, one full calendar 

year reporting period for CY 2016. 

Attestation by February 28, 2017. 

• Eligible hospitals and CAHs 

Reporting CQMs Electronically—Two 

full quarters of data (Q3 and Q4 of CY 

2016) submitted via electronic reporting 

within 2 months after the close of each 

quarter (Q3 by November 30, 2016; Q4 

by February 28, 2017). 

We also are proposing that the CQM 

reporting period for eligible hospitals 

and CAHs participating in the Medicaid 

EHR Incentive Program would be any 

continuous 90-day reporting period 

within CY 2016 for eligible hospitals 

and CAHs demonstrating meaningful 

use for the first time; and one full 

calendar year reporting period of CY 

2016 for eligible hospitals and CAHs 

that demonstrated meaningful use in 

any year prior to 2016. Providers should 

refer to their State Medicaid program for 

requirements on submission methods 

and deadlines. 

We note that, beginning in CY 2017 

and in subsequent years, we proposed 

in the Stage 3 proposed rule (80 FR 

16739 through 16740) to require a 

reporting period of one full calendar 

year for CQM reporting for all providers 

participating in the EHR Incentive 

Programs, with a limited exception for 

Medicaid providers demonstrating 

meaningful use for the first time. 

We are inviting public comment on 

these proposals. 

c. CQM Reporting Form and Method for 

the Medicare EHR Incentive Program in 

2016 

In the EHR Incentive Program Stage 2 

final rule (77 FR 54087 through 54089), 

we finalized the reporting methods for 

eligible hospitals and CAHs for the 

Medicare EHR Incentive Program, 

which included reporting electronically 

or by attestation. We finalized that 

eligible hospitals and CAHs that are 

beyond their first year of meaningful use 

will be required to electronically submit 

the selected 16 CQMs. Subsequent to 

the Stage 2 final rule, we determined 

that electronic submission of aggregatelevel data using QRDA–III would not be 

feasible in 2014 and 2015, and thus, 

eligible hospitals and CAHs would have 

the option to continue to report 

aggregate CQM results through 

attestation for the reporting periods in 

2014 and 2015 (78 FR 50904 through 

50905; 79 FR 50321 through 50322). 

We are proposing to continue our 

existing policy that eligible hospitals 

and CAHs in any year of participation 

in the Medicare EHR Incentive Program 

in 2016 may report CQMs by attestation 

or electronically using the options 

previously outlined for electronic 

reporting either for single program 

participation in the Medicare EHR 

Incentive Program, or for participation 

in multiple programs if the 

requirements of the aligned quality 

program are met. The options for CQM 

submission for eligible hospitals and 

CAHs in the Medicare EHR Incentive 

Program are as follows: 

• Eligible hospital and CAH options 

for Medicare EHR Incentive Program 

participation (single program 

participation) 

++ Option 1: Attest to CQMs through 

the EHR Registration & Attestation 

System. 

++ Option 2: Electronically report 

CQMs through QualityNet Portal. 

• Eligible hospital and CAH options 

for electronic reporting for multiple 

programs (for example: EHR Incentive 

Program plus Hospital IQR Program 

participation—Electronically report 

through QualityNet Portal. 

For the Medicaid EHR Incentive 

Program, States will continue to be 

responsible for determining whether 

and how electronic reporting of CQMs 

would occur, or if they wish to allow 

reporting through attestation. Any 

changes that States make to their CQM 

reporting methods must be submitted 

through the State Medicaid Health IT 

Plan (SMHP) process for CMS review 

and approval prior to being 

implemented. 

We are proposing to continue our 

policy that electronic submission of 

CQMs would require the use of the most 

recent release of the CQM version for 

each CQM to which the EHR is certified. 

For electronic reporting in 2016, this 

means eligible hospitals and CAHs 

would be required to use the Spring 

2015 release of the CQMs available at 

the CMS eCQM Library (http://cms.gov/ 

Regulations-and-Guidance/Legislation/

EHRIncentivePrograms/eCQM_

Library.html). We note that an EHR 

certified for CQMs under the 2014 

Edition certification criteria does not 

need to be recertified each time it is 

updated to a more recent version of the 


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221Available at: http://www.hl7.org/implement/ 

standards/product_brief.cfm?product_id=35. 

222Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=286. 

223As noted in the 2015 Edition proposed rule, 

ONC proposed to title proposed new § 170.315(c)(3) 

‘‘CQMs—report’’ to better align with the use of the 

term ‘‘report’’ throughout the 2015 Edition. Also, 

ONC is proposing to discontinue to reference 

‘‘electronic’’ in the title of certification criteria as 

it is assumes that all functions performed by 

certified health IT are done electronically. See 80 

FR 16844. 

224The CMS QRDA Implementation Guide can be 

accessed at http://www.cms.gov/Regulations-andGuidance/Legislation/EHRIncentivePrograms/

eCQM_Library.html. 

CQMs. (For further information on CQM 

reporting, we direct readers to the EHR 

Incentive Program Web site where 

guides and tip sheets are available for 

each reporting option (www.CMS.gov/

ehrincentiveprograms).) However, we 

encourage EHR developers to test any 

updates, including any changes to the 

CQMs and changes to the CMS reporting 

requirements based on the CMS QRDA 

implementation guide, on an annual 

basis. 

The form and method of electronic 

submission is further explained in 

subregulatory guidance and the 

certification process. For example, the 

following documents are updated 

annually to reflect the most recent CQM 

electronic specifications: the CMS 

QRDA Implementation Guide; program 

specific performance calculation 

guidance; and CQM electronic 

specifications and guidance documents. 

These documents are located on the 

CMS eCQM Library (http://cms.gov/

Regulations-and-Guidance/Legislation/

EHRIncentivePrograms/eCQM_

Library.html). 

We are inviting public comments on 

this proposal. 

3. Certified EHR Technology for CQMs 

for the EHR Incentive Programs in 2016 

a. Edition of Certified EHR Technology 

Requirements in 2016 

As previously stated in the Medicare 

and Medicaid EHR Incentive Programs 

Stage 2 final rule (77 FR 54051 through 

54053), CQM data submitted by eligible 

hospitals and CAHs are required to be 

captured, calculated, and reported using 

CEHRT. In accordance with this policy, 

for CQM reporting for the Medicare and 

Medicaid EHR Incentive Programs in 

2016, eligible hospitals and CAHs must 

use EHR technology certified to at least 

the 2014 Edition certification criteria for 

CQMs, which are defined at 45 CFR 

170.314(c)(1) for the capture of data 

elements, 45 CFR 170.314(c)(2) for the 

calculation of CQMs, and 45 CFR 

170.314(c)(3) for the submission of CQM 

data electronically. 

However, in the 2015 Edition 

proposed rule (80 FR 16810 through 

16872, 16900), ONC has proposed a new 

Edition of certification criteria for EHR 

technology, which may be available for 

some providers as early as 2016. The 

2015 Edition proposed rule (80 FR 

16842 through 16846) would establish 

three certification criteria for CQMs and 

set a placeholder for a fourth 

certification criterion. These three 

criteria are: 

• Proposed new § 170.315(c)(1) 

‘‘CQMs—record and export’’—to record 

and export data which aligns with the 

prior capture criteria. 

• Proposed new § 170.315(c)(2) 

‘‘CQMs—import and calculate’’—to 

import and calculate data which aligns 

with the prior calculate criteria. 

• Proposed new § 170.315(c)(4) 

‘‘CQMs—filter’’—to filter data which is 

a new function for CQM criteria in the 

2015 Edition and is not currently 

proposed to be required by the EHR 

Incentive Programs. 

ONC proposed (80 FR 16844) to 

reserve § 170.315(c)(3) ‘‘CQMs— 

report’’—to report data electronically, 

including submission testing, to be 

proposed in or with annual IPPS and/ 

or PFS rulemaking. ONC believes that, 

going forward, proposing a 2015 Edition 

certification criterion for CQM reporting 

with CMS’ annual payment rules would 

allow better alignment of ONC’s 

certification policy and standards for 

electronically specified CQM, known as 

eCQMs, with reporting with other CMS 

programs that include eCQMs, such as 

the PQRS and Hospital IQR Programs, 

which update their measure 

specifications on an annual basis 

through rulemaking. Therefore, ONC is 

proposing a 2015 Edition certification 

criterion for ‘‘CQMs—report’’ in section 

VIII.D.3.b. of the preamble of this 

proposed rule. 

b. ‘‘CQMs—Report’’ Certification 

Criterion in ONC’s 2015 Edition 

Proposed Rule 

As described previously in section 

VIII.D.3.a. of the preamble of this 

proposed rule, ONC reserved the 2015 

Edition certification criterion for 

‘‘CQMs—report’’ (at proposed new 

§ 170.315(c)(3)) to be proposed in 

conjunction with IPPS and/or PFS 

rulemaking. The 2014 Edition 

certification criterion for CQMs— 

electronic submission (at 

§ 170.314(c)(3)) requires CEHRT to 

enable a user to electronically create a 

data file for transmission of clinical 

quality measurement data using the 

Quality Reporting Document 

Architecture (QRDA) Category I and 

Category III standards, and which can be 

electronically accepted by CMS. The 

QRDA standard provides a document 

format and standard structure to 

electronically report clinical quality 

measure data.221 The QRDA Category I 

standard enables an individual patientlevel quality report that contains quality 

data for one patient for one or more 

quality measures. The QRDA Category 

III standard enables an aggregate quality 

report containing calculated summary 

data for one or more measures for a 

specified population of patients within 

a particular health system over a 

specific period of time.222

Building off of the 2014 Edition 

criterion for submission of CQMs, ONC 

is proposing a 2015 Edition certification 

criterion for ‘‘CQMs—report’’ 223 at 

proposed new § 170.315(c)(3) as part of 

the proposed 2015 Edition of 

certification criteria that would require 

a certified Health IT Module to enable 

a user to electronically create a data file 

for transmission of clinical quality 

measurement data using the ‘‘base’’ HL7 

(that is, industry-wide, non-programspecific) Quality Reporting Data 

Architecture (QRDA) Category I and 

Category III standards, at a minimum. 

ONC also is proposing to allow optional 

certification for EHRs according to the 

CMS ‘‘form and manner’’ requirements 

defined in CMS’ QRDA Implementation 

Guide 224 as part of this proposed 

criterion. We reiterate that this proposed 

certification criterion would apply to 

EPs, eligible hospitals, and CAHs. 

CMS anticipates proposing to require 

EPs, eligible hospitals, and CAHs 

seeking to report CQMs electronically (if 

using proposed new § 170.315(c)(3)) as 

part of meaningful use under the EHR 

Incentive Programs for 2016 to adhere to 

the additional standards and constraints 

on the QRDA standards for electronic 

reporting as described in the CMS 

QRDA Implementation Guide. CMS 

anticipates proposing to revise the 

definition of ‘‘certified electronic health 

record technology (CEHRT)’’ at 42 CFR 

495.4 to require certification to the 

optional portion of the 2015 Edition 

CQM reporting criterion (proposed at 

§ 170.315(c)(3)) in the CY 2016 

Medicare Physician Fee Schedule 

proposed rule later this year. 

As noted previously, ONC proposed 

standards for proposed new 

§ 170.315(c)(1) and § 170.315(c)(2) in the 

2015 Edition proposed rule (80 FR 

16844), but retained a placeholder for 

proposed new § 170.315(c)(3) so that 

this certification criterion for reporting 

could be proposed in conjunction with 

the proposals for CMS quality reporting 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24614 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

225Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=35. 

226Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=286. 

227Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=35. Note 

that in order to access the errata, the user should 

download the ‘‘HL7 Implementation Guide for CDA 

Release 2: Quality Reporting Document 

Architecture—Category I, DSTU Release 2 (US 

Realm)’’ package. 

228Available at: http://www.hl7.org/special/

Committees/projman/searchableProject

Index.cfm?action=edit&ProjectNumber=1045. 

229Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=97. 

230http://www.hl7.org/special/Committees/

projman/searchableProjectIndex.cfm?action=

edit&ProjectNumber=210. 

231http://www.hl7.org/implement/standards/

product_brief.cfm?product_id=286. Note that in 

order to access the errata, the user should download 

the ‘‘HL7 Implementation Guide for CDA Release 2: 

Quality Reporting Document Architecture— 

Category III, DSTU Release 1 (US Realm)’’ package. 

232Available at: http://www.hl7.org/special/

Committees/projman/searchableProjectIndex.

cfm?action=edit&ProjectNumber=1045. 

233Available at: http://www.hl7.org/implement/

standards/product_brief.cfm?product_id=97. 

programs in the IPPS and PFS rules. 

Therefore, in this proposed rule, for the 

requirements for the 2015 Edition 

certification criteria, ONC is proposing 

the following at proposed new 

§ 170.315(c)(3) for clinical quality 

measurement to state that technology 

certified to the 2015 Edition must 

enable a user to electronically create a 

data file for transmission of clinical 

quality measurement data which is: 

• At a minimum, in accordance with 

the standards specified in § 170.205(h) 

and § 170.205(k); and 

• Optionally, can be electronically 

accepted by CMS. 

The standard specified in § 170.205(h) 

is the HL7 Implementation Guide (IG) 

for CDA Release 2: Quality Reporting 

Document Architecture—Category I, 

Draft Standard for Trial Use (DSTU) 

Release 2 (July 2012).225 The standard 

specified in § 170.205(k) is the HL7 

Implementation Guide for CDA Release 

2: Quality Reporting Document 

Architecture—Category III, DSTU 

Release 2 (November 2012).226

ONC previously adopted the July 

2012 version of the QRDA Category I IG 

and the November 2012 version of the 

QRDA Category III IG in its 2014 Edition 

(77 FR 54232). Given the timing of this 

proposed rule and the expected 

deliverables for harmonized CQM and 

clinical decision support (CDS) 

standards (described further in the 2015 

Edition proposed rule at 80 FR 16842 

through 16843), ONC is soliciting 

comment on a series of three options to 

determine if the version of QRDA 

Category I or the QRDA-like standards it 

should adopt for the certification 

criterion should be a more recent update 

to the standard. Specifically, ONC is 

soliciting comment on the following 

options for individual patient-level 

quality reports (QRDA Category I): 

(1) The July 2012 QRDA Category I IG; 

(2) The July 2012 QRDA Category I IG 

with the September 2014 Errata;227 and 

(3) QRDA-like standards for 

individual patient-level quality reports 

based on the anticipated Quality 

Improvement and Clinical Knowledge 

(QUICK) 228 Fast Health Interoperability 

Resources (FHIR)-based Draft Standard 

for Trial Use CQM standards. 

Option 1 includes the same version of 

the QRDA Category I standard ONC 

adopted in the 2014 Edition. Option 2 

includes this same version with the 

September 2014 Errata, which provides 

guidance on implementing QRDA 

Category I based on a new version of the 

underlying information model for 

representing quality measures (that is, 

the Quality Data Model based-Health 

Quality Measures Format Release 

2.1 229). Option 3 would include 

standards based on the harmonized 

CQM and CDS standards on which the 

industry is currently developing. 

ONC is also soliciting comment on a 

fourth option of QRDA Category I 

standard it could consider adopting for 

this proposed certification criterion: 

(4) The next release of the QRDA 

Category I IG (Release 3).230

While this option was not discussed 

in the 2015 Edition proposed rule, 

stakeholders have recently made ONC 

aware that the industry is in the process 

of updating the QRDA Category I to the 

next Release 3. ONC understands that 

Release 3 is expected to be balloted in 

May 2015. Release 3 would include 

major updates to align with the Quality 

Data Model, address comments from 

Release 2, and better align with the 

Consolidated CDA Release 2 used for 

transitions of care/summary care 

records. 

While not discussed in the 2015 

Edition proposed rule, ONC in this 

proposed rule is also soliciting comment 

on three options for aggregate-level 

quality reports (QRDA Category III) it 

could adopt for this certification 

criterion: 

(1) The November 2012 QRDA 

Category III IG; 

(2) The November 2012 QRDA 

Category III IG with the September 2014 

Errata; 231 and 

(3) QRDA-like standards for aggregatelevel quality reports based on the 

anticipated Quality Improvement and 

Clinical Knowledge (QUICK) 232 Fast 

Health Interoperability Resources 

(FHIR)-based Draft Standard for Trial 

Use CQM standards. 

Option 1 includes the same version of 

the QRDA Category III standard which 

ONC adopted in the 2014 Edition. 

Option 2 includes this same version 

with the September 2014 Errata, which 

provides guidance on implementing 

QRDA Category III based on a new 

version of the underlying information 

model for representing quality measures 

(that is, the Quality Data Model basedHealth Quality Measures Format Release 

2.1 233). Option 3 would include 

standards based on the harmonized 

CQM and CDS standards on which the 

industry is currently developing. 

In connection with ONC, we are 

inviting public comment on these 

options and this proposal. 

4. CQM Development and Certification 

Cycle 

We stated in the Stage 2 final rule (77 

FR 54055) that we do not intend to use 

notice and comment rulemaking as the 

means to update or modify CQM 

specifications. Given the necessity to 

update CQM specifications after they 

have been published to ensure their 

continued clinical relevance, accuracy, 

and validity, we publish annual updates 

to the electronic specifications for EHR 

submission. Although we require 

eligible hospitals and CAHs to submit 

the most updated versions of CQMs 

when reporting electronically, CEHRT is 

not required to be recertified on annual 

basis. CMS and ONC understand that 

standards for electronically representing 

CQMs continue to evolve, and believe 

there may be value in retesting certified 

Health IT Modules (including CEHRT) 

periodically to ensure that CQMs are 

being accurately calculated and 

represented, and that they can be 

reported to CMS in the ‘‘form and 

manner’’ required for the Hospital IQR 

Program and EHR Incentive Program. As 

mentioned previously, CMS and ONC 

encourage health IT developers to retest 

their certified technology annually, and 

are soliciting comment on the 

appropriate frequency for requiring 

retesting and recertification to the most 

updated versions of CQMs and most 

recent ‘‘form and manner’’ reporting 

requirements. 

However, given the continuing 

evolution of technology and clinical 

standards, as well as the need for a 

predictable cycle from measure 

development to provider data 

submission, CMS intends to publish a 

request for information (RFI) on the 

establishment of an ongoing cycle for 


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the introduction and certification of 

new measures, the testing of updated 

measures, and the testing and 

certification of submission capabilities. 

We encourage readers to submit their 

insights and recommendations for our 

consideration upon publication of that 

RFI. 

IX. MedPAC Recommendations 

Under section 1886(e)(4)(B) of the 

Act, the Secretary must consider 

MedPAC’s recommendations regarding 

hospital inpatient payments. Under 

section 1886(e)(5) of the Act, the 

Secretary must publish in the annual 

proposed and final IPPS rules the 

Secretary’s recommendations regarding 

MedPAC’s recommendations. We have 

reviewed MedPAC’s March 2015 

‘‘Report to the Congress: Medicare 

Payment Policy’’ and have given the 

recommendations in the report 

consideration in conjunction with the 

proposed policies set forth in this 

proposed rule. MedPAC 

recommendations for the IPPS for FY 

2016 are addressed in Appendix B to 

this proposed rule. 

For further information relating 

specifically to the MedPAC reports or to 

obtain a copy of the reports, contact 

MedPAC at (202) 653–7226, or visit 

MedPAC’s Web site at: http://

www.medpac.gov. 

X. Other Required Information 

A. Requests for Data From the Public 

In order to respond promptly to 

public requests for data related to the 

prospective payment system, we have 

established a process under which 

commenters can gain access to raw data 

on an expedited basis. Generally, the 

data are now available on compact disc 

(CD) format. However, many of the files 

are available on the Internet at: http:// 

www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/

AcuteInpatientPPS/index.html. Data 

files and the cost for each file, if 

applicable, are listed below. Anyone 

wishing to purchase data tapes, 

cartridges, or diskettes should submit a 

written request along with a company 

check or money order (payable to CMS– 

PUF) to cover the cost to the following 

address: Centers for Medicare & 

Medicaid Services, Public Use Files, 

Accounting Division, P.O. Box 7520, 

Baltimore, MD 21207–0520, (410) 786– 

3691. Files on the Internet may be 

downloaded without charge. 

1. CMS Wage Data Public Use File 

This file contains the hospital hours 

and salaries from Worksheet S–3, Parts 

II and III from FY 2012 Medicare cost 

reports used to create the proposed FY 

2016 prospective payment system wage 

index. Multiple versions of this file are 

created each year. For a complete 

schedule on the release of different 

versions of this file, we refer readers to 

the wage index schedule in section III.L. 

of the preamble of this proposed rule. 

Processing 

year 

Wage data 

year 

PPS Fiscal 

year 

2015 .............. 2012 2016 

2014 .............. 2011 2015 

2013 .............. 2010 2014 

2012 .............. 2009 2013 

2011 .............. 2008 2012 

2010 .............. 2007 2011 

2009 .............. 2006 2010 

2008 .............. 2005 2009 

2007 .............. 2004 2008 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

WIFN/list.asp#TopOfPage. 

Periods Available: FY 2007 through 

FY 2016 IPPS Update. 

2. CMS Occupational Mix Data Public 

Use File 

This file contains the CY 2013 

occupational mix survey data to be used 

to compute the occupational mix 

adjustment wage indexes. Multiple 

versions of this file are created each 

year. For a complete schedule on the 

release of different versions of this file, 

we refer readers to the wage index 

schedule in section III.L. of the 

preamble of this proposed rule. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

WIFN/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

3. Provider Occupational Mix 

Adjustment Factors for Each 

Occupational Category Public Use File 

This file contains each hospital’s 

occupational mix adjustment factors by 

occupational category. Two versions of 

these files are created each year to 

support the rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

WIFN/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

4. Other Wage Index Files 

CMS releases other wage index 

analysis files after each proposed and 

final rule. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

WIFN/list.asp#TopOfPage. 

Periods Available: FY 2005 through 

FY 2016 IPPS Update. 

5. FY 2016 IPPS SSA/FIPS CBSA State 

and County Crosswalk 

This file contains a crosswalk of State 

and county codes used by the Social 

Security Administration (SSA) and the 

Federal Information Processing 

Standards (FIPS), county name, and a 

list of Core-Based Statistical Areas 

(CBSAs). 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

6. HCRIS Cost Report Data 

The data included in this file contain 

cost reports with fiscal years ending on 

or after September 30, 1996. These data 

files contain the highest level of cost 

report status. 

Media: Internet at: http://

www.cms.hhs.gov/CostReports/02_

HospitalCostReport.asp. 

There are no longer data offered on a 

CD. All of the data collected are now 

available on the following Web site free 

for download: http://www.cms.gov/

Research-Statistics-Data-and-Systems/

Downloadable-Public-Use-Files/CostReports/?redirect=/CostReports/ 

7. Provider-Specific File 

This file is a component of the 

PRICER program used in the MAC’s 

system to compute DRG/MS–DRG 

payments for individual bills. The file 

contains records for all prospective 

payment system eligible hospitals, 

including hospitals in waiver States, 

and data elements used in the 

prospective payment system 

recalibration processes and related 

activities. Beginning with December 

1988, the individual records were 

enlarged to include pass-through per 

diems and other elements. 

Media: Internet at: http://

www.cms.hhs.gov/

ProspMedicareFeeSvcPmtGen/03_psf_

text.asp 

Period Available: Quarterly Update. 

8. CMS Medicare Case-Mix Index File 

This file contains the Medicare casemix index by provider number as 

published in each year’s update of the 

Medicare hospital inpatient prospective 

payment system. The case-mix index is 

a measure of the costliness of cases 

treated by a hospital relative to the cost 

of the national average of all Medicare 

hospital cases, using DRG/MS–DRG 

weights as a measure of relative 

costliness of cases. Two versions of this 

file are created each year to support the 

rulemaking. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage 

Periods Available: FY 1985 through 

FY 2016. 

9. MS–DRG Relative Weights (Also 

Table 5—MS–DRGs) 

This file contains a listing of MS– 

DRGs, MS–DRG narrative descriptions, 

relative weights, and geometric and 

arithmetic mean lengths of stay for each 

fiscal year. Two versions of this file are 

created each year to support the 

rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage 

Periods Available: FY 2005 through 

FY 2016 IPPS Update 

10. IPPS Payment Impact File 

This file contains data used to 

estimate payments under Medicare’s 

hospital impatient prospective payment 

systems for operating and capital-related 

costs. The data are taken from various 

sources, including the Provider-Specific 

File, HCRIS Cost Report Data, MedPAR 

Limited Data Sets, and prior impact 

files. The data set is abstracted from an 

internal file used for the impact analysis 

of the changes to the prospective 

payment systems published in the 

Federal Register. Two versions of this 

file are created each year to support the 

rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

HIF/list.asp#TopOfPage. 

Periods Available: FY 1994 through 

FY 2016 IPPS Update. 

11. AOR/BOR Tables 

This file contains data used to 

develop the MS–DRG relative weights. It 

contains mean, maximum, minimum, 

standard deviation, and coefficient of 

variation statistics by MS–DRG for 

length of stay and standardized charges. 

The BOR tables are ‘‘Before Outliers 

Removed’’ and the AOR is ‘‘After 

Outliers Removed.’’ (Outliers refer to 

statistical outliers, not payment 

outliers.) 

Two versions of this file are created 

each year to support the rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage. 

Periods Available: FY 2005 through 

FY 2016 IPPS Update. 

12. Prospective Payment System (PPS) 

Standardizing File 

This file contains information that 

standardizes the charges used to 

calculate relative weights to determine 

payments under the hospital inpatient 

operating and capital prospective 

payment systems. Variables include 

wage index, cost-of-living adjustment 

(COLA), case-mix index, indirect 

medical education (IME) adjustment, 

disproportionate share, and the CoreBased Statistical Area (CBSA). The file 

supports the rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

13. Hospital Readmissions Reduction 

Program File 

This file contains information on the 

calculation of the Hospital 

Readmissions Reduction Program 

payment adjustment. Variables include 

the proxy excess readmission ratios for 

acute myocardial infarction (AMI), 

pneumonia (PN) and heart failure (HF), 

coronary obstruction pulmonary disease 

(COPD), and total hip arthroplasty 

(THA)/total knee arthroplasty (TKA) 

and the proxy readmissions payment 

adjustment for each provider included 

in the program. In addition, the file 

contains information on the number of 

cases for each of the applicable 

conditions excluded in the calculation 

of the readmission payment adjustment 

factors, and it contains MS–DRG relative 

weight information to estimate the 

payment adjustment factors. The file 

supports the rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

For further information concerning 

these data tapes, contact the CMS Public 

Use Files Hotline at (410) 786–3691. 

14. Medicare Disproportionate Share 

Hospital (DSH) Supplemental File 

This file contains information on the 

calculation of the uncompensated care 

payments for FY 2016. Variables 

include a hospital’s SSI days and 

Medicaid days used to determine a 

hospital’s share of uncompensated care 

payments, total uncompensated care 

payments and estimated per claim 

uncompensated care payment amounts. 

The file supports the rulemaking. 

Media: Internet at: http://

www.cms.hhs.gov/AcuteInpatientPPS/

FFD/list.asp#TopOfPage. 

Period Available: FY 2016 IPPS 

Update. 

Commenters interested in discussing 

any data used in constructing this 

proposed rule should contact Chioma 

Obi at (410) 786–6050. 

B. Collection of Information 

Requirements 

1. Statutory Requirement for Solicitation 

of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

In this proposed rule, we are 

soliciting public comment on each of 

these issues for the following sections of 

this document that contain information 

collection requirements (ICRs). 

2. ICRs for Add-On Payments for New 

Services and Technologies 

Section II.I.1. of the preamble of the 

proposed rule discusses add-on 

payments for new services and 

technologies. Specifically, this section 

states that applicants for add-on 

payments for new medical services or 

technologies for FY 2017 must submit a 

formal request. A formal request 

includes a full description of the 

clinical applications of the medical 

service or technology and the results of 

any clinical evaluations demonstrating 

that the new medical service or 

technology represents a substantial 

clinical improvement. In addition, the 

request must contain a significant 

sample of the data to demonstrate that 

the medical service or technology meets 

the high-cost threshold. 

We believe the burden associated 

with this requirement is exempt from 

the PRA under 5 CFR 1320.3(c), which 

defines the agency collection of 

information subject to the requirements 

of the PRA as information collection 

imposed on 10 or more persons within 

any 12-month period. This information 

collection does not impact 10 or more 

entities in a 12-month period. For FYs 

2008, 2009, 2010, 2011, 2012, 2013, 

2014, 2015, and 2016, we received 1, 4, 


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5, 3, 3, 5, 5, 7, and 9 applications, 

respectively. 

3. ICRs for the Proposed Occupational 

Mix Adjustment to the Proposed FY 

2016 Wage Index (Hospital Wage Index 

Occupational Mix Survey) 

Section III.F. of the preamble of this 

proposed rule discusses the proposed 

occupational mix adjustment to the 

proposed FY 2016 wage index, 

respectively. While the preamble of this 

proposed rule does not contain any new 

ICRs, we note that there is an OMB 

approved information collection request 

associated with the hospital wage index. 

Section 304(c) of Public Law 106–554 

amended section 1886(d)(3)(E) of the 

Act to require CMS to collect data at 

least once every 3 years on the 

occupational mix of employees for each 

short-term, acute care hospital 

participating in the Medicare program 

in order to construct an occupational 

mix adjustment to the wage index. We 

collect the data via the occupational mix 

survey. 

The burden associated with this 

information collection requirement is 

the time and effort required to collect 

and submit the data in the Hospital 

Wage Index Occupational Mix Survey to 

CMS. The aforementioned burden is 

subject to the PRA; it is currently 

approved under OMB control number 

0938–0907. 

4. Hospital Applications for Geographic 

Reclassifications by the MGCRB 

Section III.J.2. of the preamble of this 

proposed rule discusses proposed 

changes to the wage index based on 

hospital reclassifications. As stated in 

that section, under section 1886(d)(10) 

of the Act, the MGCRB has the authority 

to accept short-term IPPS hospital 

applications requesting geographic 

reclassification for wage index and to 

issue decisions on these requests by 

hospitals for geographic reclassification 

for purposes of payment under the IPPS. 

The burden associated with this 

application process is the time and 

effort necessary for an IPPS hospital to 

complete and submit an application for 

reclassification to the MGCRB. The 

burden associated with this requirement 

is subject to the PRA. It is currently 

approved under OMB control number 

0938–0573. 

5. Proposed Elimination of the 

Simplified Cost Allocation Methodology 

for Hospitals 

In section IV.H. of the preamble of 

this proposed rule, we are proposing to 

amend the regulations at 42 CFR 

412.302(d)(4) to limit a hospital’s ability 

to elect the simplified cost allocation 

methodology under the terms and 

conditions provided in the instructions 

for CMS Form 2552 to cost reporting 

periods beginning before October 1, 

2015. We are proposing to limit the 

election of the simplified cost allocation 

methodology because the allocation of 

the costs of capital-related movable 

equipment using this methodology 

yields less precise calculated CCRs. 

Currently, less than 1 percent of 

hospitals have elected to use the 

simplified cost allocation methodology. 

Based on FY 2013 data, only 9 of 1,269 

CAHs and 23 of 4,389 hospitals other 

than CAHs used the simplified cost 

allocation methodology. Furthermore, 

we believe that advances in technology 

have reduced the cost of recordkeeping, 

which has allowed hospitals to maintain 

accurate statistical data and afforded 

them the flexibility to change to a more 

precise allocation methodology. 

Although we are proposing to 

eliminate the simplified cost allocation 

methodology for hospitals, we believe 

the currently approved burden estimates 

for the Hospital and Health Care 

Complex Cost Report (OMB control 

number 0938–0050) are still applicable 

to hospitals completing the Hospital and 

Health Care Complex Cost Report. The 

time required to address this proposed 

revision would be subsumed in the total 

burden estimate for an entity to comply 

with all of the requirements in the cost 

report. 

6. ICRs for the Hospital Inpatient 

Quality Reporting (IQR) Program 

The Hospital IQR Program (formerly 

referred to as the Reporting Hospital 

Quality Data for Annual Payment 

(RHQDAPU) Program) was originally 

established to implement section 501(b) 

of the MMA, Public Law 108–173. This 

program expanded our voluntary 

Hospital Quality Initiative. The Hospital 

IQR Program originally consisted of a 

‘‘starter set’’ of 10 quality measures. The 

collection of information associated 

with the original starter set of quality 

measures was previously approved 

under OMB control number 0938–0918. 

All of the information collection 

requirements previously approved 

under OMB control number 0938–0918 

have been combined with the 

information collection request 

previously approved under OMB 

control number 0938–1022. We no 

longer use OMB control number 0938– 

0918. 

We added additional quality measures 

to the Hospital IQR Program and 

submitted the information collection 

request to OMB for approval. This 

expansion of the Hospital IQR measures 

was part of our implementation of 

section 5001(a) of the Deficit Reduction 

Act of 2005 (DRA). Section 

1886(b)(3)(B)(viii)(III) of the Act, added 

by section 5001(a) of the DRA, requires 

that the Secretary expand the ‘‘starter 

set’’ of 10 quality measures that were 

established by the Secretary as of 

November 1, 2003, to include measures 

‘‘that the Secretary determines to be 

appropriate for the measurement of the 

quality of care furnished by hospitals in 

inpatient settings.’’ The burden 

associated with these reporting 

requirements is currently approved 

under OMB control number 0938–1022. 

In this proposed rule, we are 

proposing refinements to the measure 

cohorts for: (1) The Hospital 30-Day AllCause, Risk-Standardized Mortality Rate 

(RSMR) following Pneumonia 

Hospitalization measure (NQF #0468); 

and (2) the Hospital 30-Day All-Cause, 

Risk-Standardized Readmission Rate 

(RSRR) following Pneumonia 

Hospitalization measure (NQF #0506). 

We also are proposing eight additional 

measures to be added to the Hospital 

IQR Program measure set beginning 

with the FY 2018 payment 

determination and for subsequent years. 

Seven of these measures are claimsbased, and one measure is structural. 

The eight new measures are: (1) 

Hospital Survey on Patient Safety 

Culture (structural); (2) Kidney/UTI 

Clinical Episode-Based Payment 

(claims-based); (3) Cellulitis Clinical 

Episode-Based Payment (claims-based); 

(4) Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment (claims-based); 

(5) Lumbar Spine Fusion/Re-Fusion 

Clinical Episode-Based Payment 

(claims-based); (6) Hospital-Level, RiskStandardized Payment Associated with 

an Episode-of-Care for Primary Elective 

THA/TKA (claims-based); (7) Excess 

Days in Acute Care after Hospitalization 

for Acute Myocardial Infarction (claimsbased); and (8) Excess Days in Acute 

Care after Hospitalization for Heart 

Failure (claims-based). 

Because these claims-based measures 

can be calculated based on data that are 

already reported to the Medicare 

program for payment purposes, we 

believe no additional information 

collection will be required from the 

hospitals for the seven proposed claimsbased measures. In addition, the burden 

associated with the structural measure 

we are proposing, Hospital Survey on 

Patient Safety Culture, is expected to be 

negligible; therefore, its proposed 

addition will not result in a significant 

burden increase. 

We also are proposing nine measures 

for removal. We believe that there will 

be a reduction in burden for hospitals 

due to our proposed removal of seven of 


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234QualityNet. Available at: https://

www.qualitynet.org/dcs/BlobServer?blobkey=id&

blobnocache=true&blobwhere=1228890406532&

blobheader=multipart%2Foctet-stream&

blobheadername1=Content-Disposition&

blobheadervalue1=attachment%3B

filename%3D2015-02-IP.pdf&blobcol=urldata&

blobtable=MungoBlobs. 

235http://www.bls.gov/ooh/healthcare/medicalrecords-and-health-information-technicians.html. 

236http://www.whitehouse.gov/omb/circulars_

a076_a76_incl_tech_correction. 

these measures, which are chartabstracted: (1) STK–01 Venous 

Thromboembolism Prophylaxis (NQF 

#0434); (2) STK–06: Discharged on 

Statin Medication* (NQF #0439); (3) 

STK–08: Stroke Education* (NQF 

endorsement removed); (4) VTE–1: 

Venous Thromboembolism 

Prophylaxis* (NQF #0371); (5) VTE–2: 

Intensive Care Unit Venous 

Thromboembolism Prophylaxis* (NQF 

#0372); (6) VTE–3: Venous 

Thromboembolism Patients with 

Anticoagulation Overlap Therapy* 

(NQF #0373); and (7) AMI–7a 

Fibrinolytic Therapy Received Within 

30 Minutes of Hospital Arrival* (NQF 

#0164). (An asterisk (*) indicates that 

the measure is proposed for retention as 

an electronic clinical quality measure 

for the FY 2018 payment determination 

in section VIII.A.8. of the preamble of 

this proposed rule.) Due to the burden 

associated with the collection of chartabstracted data, we estimate that the 

proposed removal of AMI–7a would 

result in a burden reduction of 

approximately 219,000 hours across all 

hospitals. We estimate that the proposed 

removal of seven chart-abstracted 

measures will result in a burden 

reduction of approximately 522,000 

hours across all hospitals. 

Two of the nine measures proposed 

for removal have been previously 

suspended from the Hospital IQR 

Program. Therefore, their proposed 

removal would not affect burden to 

hospitals. These measures are: IMM–1 

Pneumococcal Immunization (NQF 

#1653); and SCIP–Inf–4 Cardiac Surgery 

Patients with Controlled Postoperative 

Blood Glucose (NQF #0300). The 

suspension of IMM–1 is currently 

reflected under OMB control number 

0938–1022. The suspension of SCIP– 

Inf–4, which was formalized on January 

9, 2015,234 will be reflected in the PRA 

package being submitted this year under 

OMB control number 0938–1022. 

For the FY 2018 payment 

determination and subsequent years, we 

also are proposing to require hospitals 

to submit 16 measures electronically for 

the Hospital IQR Program in a manner 

that would permit eligible hospitals to 

partially align Hospital IQR Program 

requirements with some requirements 

under the Medicare EHR Incentive 

Program. We believe that the total 

burden associated with the electronic 

clinical quality measure reporting 

proposal will be similar to the burden 

outlined for hospitals in the EHR 

Incentive Program Stage 2 final rule (77 

FR 54126 through 54133). In that final 

rule, the burden estimate for a hospital 

to attest and report all 16 electronic 

clinical quality measures is 2 hours and 

40 minutes per submission (77 FR 

54132). We believe that this estimate is 

accurate and appropriate to also apply 

to the Hospital IQR Program, given the 

alignment between the electronic 

clinical quality measure reporting 

requirements for both programs. In total, 

we expect the burden associated with 

our proposal to require hospitals to 

report electronic clinical quality 

measures to be 5 hours and 20 minutes 

per hospital for two quarters of data 

submission, and 17,600 hours total for 

two quarters of data submission across 

the approximately 3,300 hospitals 

participating in the Hospital IQR 

Program. We estimate that reporting 

these electronic clinical quality 

measures can be accomplished by staff 

with a mean hourly wage of $16.42 per 

hour.235 Under OMB Circular A–76, in 

calculating direct labor, agencies should 

not only include salaries and wages, but 

also ‘‘other entitlements’’ such as fringe 

benefits.236 This Circular provides that 

the civilian position full fringe benefit 

cost factor is 36.25 percent. Therefore, 

using these assumptions, we estimate an 

hourly labor cost of $22.37 ($16.42 base 

salary + $5.95 fringe) and a total cost of 

$393,712 (17,600 hours × $22.37 per 

hour) across approximately 3,300 

hospitals participating in the Hospital 

IQR Program to report 16 electronic 

clinical quality measures for two 

quarters (Q3 and Q4). 

For validation of chart-abstracted data 

for the FY 2018 payment determination 

and subsequent years, we require 

hospitals to provide 72 charts per 

hospital per year (with an average page 

length of 1,500), including 40 charts for 

HAI validation and 32 charts for clinical 

process of care validation, for a total of 

108,000 pages per hospital per year. We 

reimburse hospitals at 12 cents per 

photocopied page (79 FR 50346) for a 

total per hospital cost of $12,960. For 

hospitals providing charts digitally via a 

re-writable disc, such as encrypted CD– 

ROMs, DVDs, or flash drives, we will 

reimburse hospitals at a rate of 40 cents 

per disc. 

Under OMB number 0938–1022, we 

estimated that the total burden for the 

FY 2017 payment determination was 

1,781 hours per hospital and 5.9 million 

hours across approximately 3,300 

hospitals participating in the Hospital 

IQR Program. Using data on chartabstracted measures from the 3rd 

quarter in 2013 through the 2nd quarter 

in 2014, we have revised our burden 

estimate to include updates to the 

number of records reported per measure 

set, as well as the time associated with 

data collection. Considering the 

proposals described in this proposed 

rule, as well as our updated estimates 

for the number of records reported and 

the time associated with data reporting 

activities, we estimate a total burden of 

2,293 hours per hospital and 7.6 million 

hours across approximately 3,300 

hospitals participating in the Hospital 

IQR Program for the FY 2018 payment 

determination. This burden estimate 

includes the full measure set proposed 

for the Hospital IQR Program FY 2018 

payment determination and accounts for 

burden changes associated with all 

newly proposed measures as well as 

measures proposed for removal, as 

discussed above in this section. 

In addition, this burden estimate 

accounts for other activities such as 

population and sampling, reviewing 

reports for claims-based measure sets, 

HAI validation templates, as well as all 

other forms and structural measures. 

The estimate excludes the burden 

associated with the NHSN and HCAHPS 

measures, both of which are submitted 

under separate information collection 

requests and are approved under OMB 

control numbers 0920–0666 and 0938– 

0981, respectively. The burden 

estimates in this proposed rule are the 

estimates for which we are requesting 

OMB approval. 

7. ICRs for PPS-Exempt Cancer Hospital 

Quality Reporting (PCHQR) Program 

As discussed in section VIII.B. of the 

preamble of this proposed rule, section 

1866(k)(1) of the Act requires, for 

purposes of FY 2014 and each 

subsequent fiscal year, that a hospital 

described in section 1886(d)(1)(B)(v) of 

the Act (a PPS-exempt cancer hospital, 

or a PCH) submit data in accordance 

with section 1866(k)(2) of the Act with 

respect to such fiscal year. 

In section VIII.B.5 of the preamble of 

this proposed rule, we are proposing 

that PCHs will submit data on three 

additional measures beginning with the 

FY 2018 program: (1) CDCNHSN 

Facility-Wide Inpatient Hospital-Onset 

Methicillin-Resistant Staphylococcus 

aureus (MRSA) Bacteremia Outcome 

Measure (NQF #1716); (2) CDC NHSN 

Facility-Wide Inpatient Hospital-Onset 

Clostridium difficile Infection (CDI) 

Outcome Measure (NQF #1717); and (3) 


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237OMB Control Number History. Available at: 

http://www.reginfo.gov/public/do/

PRAOMBHistory?ombControlNumber=0920-0666. 

238FY 2015 IPPS/LTCH PPS final rule (79 FR 

50443 through 50444). 

239 Ibid. 

240 [(49 cases per measure × 4 quarters) + 0.5 

(abstraction/training time)] × 11 PCHs = 6,468 hours 

per year. 

241 6,468 hours¥1.83 hours = 6,466.17 hours. 

242 6,466.17 hours * $66/hour. [We are now 

estimating an hourly salary of $33 (http://

swz.salary.com/salarywizard/Staff-Nurse-RNHourly-Salary-Details.aspx). After accounting for 

employee benefits and overhead, this results in a 

total cost of $66 per labor hour] 

CDC NHSN Influenza Vaccination 

Coverage Among Healthcare Personnel 

Measure (NQF #0431). In conjunction 

with our proposal in section VIII.B.2. of 

the preamble of this proposed rule to 

remove the six SCIP measures from the 

PCHQR Program beginning with fourth 

quarter (Q4) 2015 discharges and for 

subsequent years, the PCHQR measure 

set would consist of 16 measures 

beginning with the FY 2018 program. 

With respect to our proposal to add 

three measures beginning with the FY 

2018 program, this estimate excludes 

the burden associated with two of these 

measures (the CDC NHSN MRSA 

measure and the CDC NHSN CDI 

measure) both of which are submitted 

under separate information collection 

requests and are approved under a 

separate OMB control numbers (0920– 

0666).237 Using the same methodology 

as the FY2015 IPPS/LTCH PPS final 

rule,238 for the third proposed new 

measure (CDC NHSN Influenza 

Vaccination Coverage Among 

Healthcare Personnel measure), we 

estimate that it will take 10 minutes 

annually per PCH, or an additional 1.83 

hours for all PCHs annually to report the 

measure.239

Our proposal to remove six SCIP 

measures would reduce the burden 

experienced by PCHs. We estimate a 

reduction in hourly burden of 6,468 240

hours per year beginning with Q4 2015 

and for subsequent program years across 

the 11 PCHs. 

In summary, as a result of our 

proposals, we estimate a reduction of 

6,466.17 241 hours of burden per year 

associated with the proposals above for 

all 11 PCHs beginning with the FY 2018 

program. Coupled with our estimated 

salary costs,242 we estimate that these 

proposed changes would result in a 

reduction in annual labor costs of 

$426,767.22 beginning with the FY 2018 

PCHQR Program. 

8. ICRs for the Hospital Value-Based 

Purchasing (VBP) Program 

In section IV.F. of the preamble of the 

proposed rule, we discuss proposed 

requirements for the Hospital VBP 

Program. Specifically, in this proposed 

rule, we are proposing to adopt one new 

measure beginning with the FY 2018 

program year, the 3-Item Care Transition 

Measure (CTM–3) (NQF #0228). We also 

are proposing to adopt one new measure 

beginning with the FY 2021 program 

year, the Hospital 30-Day, All-Cause, 

Risk-Standardized Mortality Rate 

(RSMR) Following Chronic Obstructive 

Pulmonary Disease (COPD) 

Hospitalization Measure (NQF #1893) 

(MORT–30–COPD). 

As required under section 

1886(o)(2)(A) of the Act, both of these 

additional measures are required for the 

Hospital IQR Program. Therefore, their 

inclusion in the Hospital VBP Program 

does not result in any additional burden 

because the Hospital VBP Program uses 

data that are required for the Hospital 

IQR Program. 

9. ICRs for the Long-Term Care Hospital 

Quality Reporting Program (LTCH QRP) 

As discussed in sections VIII.C.5.a 

and VIII.C.5.b. of the preamble of this 

proposed rule, we are retaining the 

following 12 previously finalized 

quality measures for use in the LTCH 

QRP: 

LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2015 AND FY 2016 PAYMENT DETERMINATIONS

AND SUBSEQUENT YEARS

NQF ID Measure title Payment determination Final rule(s) in which measure 

was finalized 

NQF #0138 ......... National Health Safety Network (NHSN) CatheterAssociated Urinary Tract Infection (CAUTI) Outcome Measure.FY 2015 payment determination 

and subsequent years.

FY 2012 IPPS/LTCH PPS final 

rule; updated in FY 2013 IPPS/

LTCH PPS final rule. 

NQF #0139 ......... National Health Safety Network (NHSN) Central 

Line-Associated Blood Stream Infection 

(CLABSI) Outcome Measure.

FY 2015 payment determination 

and subsequent years.

FY 2012 IPPS/LTCH PPS final 

rule; updated in FY 2013 IPPS/

LTCH PPS final rule. 

NQF #0678 ......... Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay).FY 2015 payment determination 

and subsequent years *.

FY 2012 IPPS/LTCH PPS final 

rule; updated in FY 2014 IPPS/

LTCH PPS final rule. 

NQF #0680 ......... Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay).FY 2016 payment determination 

and subsequent years.

FY 2015 IPPS/LTCH PPS final 

rule. 

NQF #0431 ......... Influenza Vaccination Coverage among Healthcare 

Personnel.

FY 2016 payment determination 

and subsequent years.

FY 2015 IPPS/LTCH PPS final 

rule. 

* Proposed in this FY 2016 IPPS/LTCH PPS proposed rule for the FY 2018 payment determination and subsequent years 

LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS

AND SUBSEQUENT YEARS

NQF ID Measure title Payment determination Final rule(s) in which measure 

was finalized 

NQF #1716 ......... National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 

Bacteremia Outcome Measure.

FY 2017 and Subsequent Years .. FY 2014 IPPS/LTCH PPS final 

rule. 

NQF #1717 ......... National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium 

difficile Infection (CDI) Outcome Measure.

FY 2017 payment determination 

and subsequent years.

FY 2014 IPPS/LTCH PPS final 

rule. 


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LTCH QRP QUALITY MEASURES PREVIOUSLY ADOPTED FOR THE FY 2017 AND FY 2018 PAYMENT DETERMINATIONS

AND SUBSEQUENT YEARS—Continued 

NQF ID Measure title Payment determination Final rule(s) in which measure 

was finalized 

NQF #2512 ......... All-Cause Unplanned Readmission Measure for 30 

Days Post-Discharge from Long-Term Care Hospitals **.

FY 2017 payment determination 

and subsequent years **.

FY 2014 IPPS/LTCH PPS final 

rule. 

Application of 

NQF #0674.

Percent of Residents Experiencing One or More 

Falls with Major Injury (Long Stay).

FY 2018 payment determination 

and subsequent years **.

FY 2014 IPPS/LTCH PPS final 

rule. 

NQF #2631 * ....... Functional Status Quality Measure: Percent of 

Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment 

and a Care Plan That Addresses Function.

FY 2018 payment determination 

and subsequent years.

FY 2015 IPPS/LTCH PPS final 

rule. 

NQF #2632 * ....... Functional Status Quality Measure: Functional Outcome Measure: Change in Mobility among LongTerm Care Hospital Patients Requiring Ventilator 

Support.

FY 2018 payment determination 

and subsequent years.

FY 2015 IPPS/LTCH PPS final 

rule. 

Not NQF endorsed.National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Outcome Measure.FY 2018 payment determination 

and subsequent years.

FY 2015 IPPS/LTCH PPS final 

rule. 

* Under review at NQF. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867, NQF #2631 and NQF #2632. 

** Proposed in this FY 2016 IPPS/LTCH PPS proposed rule for the FY 2018 payment determination and subsequent years 

As discussed in sections VIII.C.6.a. 

through c. of the preamble of this 

proposed rule, we are proposing three 

previously finalized quality measures 

for use in the LTCH QRP for the FY 

2018 payment determination and 

subsequent years. We are proposing two 

of these measures in order to establish 

their use as cross-setting measures that 

satisfy the required addition of quality 

measures under the domains of skin 

integrity and incidence of major falls, as 

mandated by section 1899B of the Act, 

as added by the IMPACT Act of 2014: 

Patients or Residents with Pressure 

Ulcers that are New or Worsened (NQF 

#0678), and an Application of Percent of 

Residents Experiencing One or More 

Falls with Major Injury (Long Stay) 

(NQF #0674). We are proposing a third 

previously finalized measure, All-Cause 

Unplanned Readmission Measure for 30 

Days Post-Discharge From Long-Term 

Care Hospitals (NQF #2512), in order to 

establish the newly NQF-endorsed 

status of this measure. 

Finally, as discussed in sections 

VIII.C.6.d. of the preamble of this 

proposed rule, for the FY 2018 payment 

determination and subsequent years we 

are proposing the addition of one new 

quality measure to the LTCHQR 

Program: Cross-Setting Functional 

Status Process Measure: an application 

of Percent of Patients or Residents with 

an Admission and Discharge Functional 

Assessment and a Care Plan that 

Addresses Function (NQF #2631; under 

review). This measure satisfies the 

addition of a quality measure under the 

third initially required domain of 

functional status, as mandated by 

section 1899B of the Act as added by the 

IMPACT Act of 2014. 

Six of the measures being retained in 

this FY 2016 IPPS/LTCH PPS proposed 

rule are currently collected via the CDC 

NHSN. The NHSN is a secure, Internetbased HAI tracking system maintained 

and managed by the CDC. The NHSN 

enables healthcare facilities to collect 

and use data about HAIs, adherence to 

clinical practices known to prevent 

HAIs, and other adverse events within 

their organizations. NHSN data 

collection occurs via a Web-based tool 

hosted by the CDC and provided free of 

charge to facilities. In this proposed 

rule, we have not proposed to adopt any 

new quality measures that are collected 

via the CDC’s NHSN. Therefore, at this 

time, there is no additional burden 

related to this submission method. Any 

burden related to NHSN-based quality 

measures we have retained in this 

proposed rule, has been previously 

discussed in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50443 through 

50445), and has been previously 

approved under OMB control number 

0920–0666, with an expiration date of 

November, 31, 2016. 

The All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge From LTCHs (NQF #2512), 

which we have proposed in this 

proposed rule, is a Medicare FFS 

claims-based measure. Because claimsbased measures can be calculated based 

on data that are already reported to the 

Medicare program for payment 

purposes, we believe no additional 

information collection will be required 

from the LTCHs. 

The remaining 6 measures will be 

collected utilizing the LTCH CARE Data 

Set (LCDS). The LCDS, in its current 

form (version 2.0), has been approved 

under OMB control number 0938–1163. 

Version 2.0 of the LCDS contains data 

elements related to patient demographic 

data, various voluntary questions, as 

well as data elements related to the 

following quality measures: 

• Percent of Residents or Patients with 

Pressure Ulcers That Are New or 

Worsened (Short Stay) (NQF #0678) 

• Percent of Residents or Patients Who 

Were Assessed and Appropriately 

Given the Seasonal Influenza Vaccine 

(Short Stay) (NQF #0680) 

Version 3.0 of the LCDS is under 

development and will contain those 

data elements included in version 2.0, 

as well as additional data elements in 

order to allow for the collection of data 

associated with the following quality 

measures: 

• Application of Percent of Residents 

Experiencing One or More Falls with 

Major Injury (Long Stay) (NQF #0674) 

(previously finalized in the FY 2015 

IPPS/LTCH PPS final rule) 

• Application of Percent of Long-Term 

Care Hospital Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That 

Addresses Function (NQF # 2631— 

under NQF review) (previously 

finalized in the FY 2015 IPPS/LTCH 

PPS final rule) 

• Functional Status Outcome Measure: 

Change in Mobility Among LongTerm Care Hospital Patients Requiring 

Ventilator Support (NQF #2632— 

under NQF review) (previously 

finalized in the FY 2015 IPPS/LTCH 

PPS final rule) 

Each time we add new data elements 

to the LCDS related to newly proposed 

or finalized LTCH QRP quality 

measures, we are required by the PRA 

to submit the expanded data collection 

instrument to OMB for review and 


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approval. Section 1899B(m) of the Act, 

as added by IMPACT Act of 2014, 

provides that the PRA requirements do 

not apply to section 1899B of the Act 

and the sections referenced in 

subsection 1899B(a)(2)(B) of the Act that 

require modifications in order to 

achieve the standardization of patient 

assessment data. We believe that version 

3.0 of the LTCH CARE Data Set falls 

under the PRA provisions in 1899B(m) 

of the Act. We believe that all additional 

data elements added to version 3.0 of 

the LCDS are for the purpose of 

standardizing patient assessment data, 

as required under section 1899B(a)(1)(B) 

of the Act. 

A comprehensive list of all data 

elements included in version 3.0 of the 

LCDS is available in the LTCH QRP 

Manual, as is a crosswalk outlining the 

differences between version 2.0 and 3.0 

of the LCDS. The Manual accessible on 

the following LTCH Quality Reporting 

Measures Information Web page: 

http://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/LTCH-Quality-Reporting/

LTCH-Quality-Reporting-MeasuresInformation.html. For a discussion of 

burden related to version 3.0 of the 

LCDS, we refer readers to section I.M. of 

Appendix A of this proposed rule. 

While the reporting of quality 

measures is an information collection, 

the PRA does not apply in accordance 

with the amendments to the Act made 

by IMPACT Act of 2014. More 

specifically, section 1899B(m) of the Act 

provides that the PRA requirements do 

not apply to section 1899B of the Act 

and the sections referenced in 

subsection 1899B(a)(2)(B) of the Act that 

require modifications in order to 

achieve the standardization of patient 

assessment data. 

10. ICRs for the Electronic Health 

Record (EHR) Incentive Program and 

Meaningful Use 

In section VIII.D. of the preamble of 

this proposed rule, we discuss our 

proposals to align the Medicare EHR 

Incentive Program reporting and 

submission timelines for electronically 

submitted clinical quality measures for 

eligible hospitals and CAHs with the 

Hospital IQR Program’s reporting and 

submission timelines for 2016. Because 

these proposals for data collection 

would align with the reporting 

requirements in place for the Hospital 

IQR Program and eligible hospitals and 

CAHs still have the option to submit 

their clinical quality measures via 

attestation for the Medicare EHR 

Incentive Program, we do not believe 

there is any additional burden for this 

collection of information. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–1632–P; Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

C. Response to Public Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

public comments we receive by the date 

and time specified in the DATES section 

of this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the public comments in the 

preamble of that document. 

List of Subjects 

42 CFR Part 412 

Administrative practice and 

procedure, Health facilities, Medicare, 

Puerto Rico, Reporting and 

recordkeeping requirements. 

45 CFR Part 170 

Computer technology, Electronic 

health record, Electronic information 

system, Electronic transactions, Health, 

Health care, Health information 

technology, Health insurance, Health 

records, Hospitals, Incorporation by 

reference, Laboratories, Medicaid, 

Medicare, Privacy, Reporting and 

recordkeeping requirements, Public 

Health, Security. 

For the reasons stated in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

Title 42—Public Health 

PART 412—PROSPECTIVE PAYMENT 

SYSTEMS FOR INPATIENT HOSPITAL 

SERVICES 

■ 1. The authority citation for part 412 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh), sec. 124 of Pub. L. 106–113 (113 

Stat. 1501A–332), sec. 1206 of Public Law 

113–67, and sec. 112 of Public Law 113–93. 

■ 2. Section 412.23 is amended by— 

■ a. In paragraph (e)(3)(i), removing the 

cross-reference ‘‘paragraphs (e)(3)(ii) 

through (iv)’’ wherever it appears and 

adding in its place the cross-reference 

‘‘paragraphs (e)(3)(ii) through (vi)’’. 

■ b. Adding new paragraph (e)(3)(vi). 

■ c. Revising paragraph (e)(6)(ii) 

introductory text. 

The addition and revision reads as 

follows: 

§ 412.23 Excluded hospitals: 

Classifications. 

* * * * * 

(e) * * * 

(3) * * * 

(vi) For cost reporting periods 

beginning on or after October 1, 2015, 

the Medicare inpatient days and 

discharges that are paid at the site 

neutral payment rate specified at 

§ 412.522(c)(1) or paid under a Medicare 

Advantage plan (Medicare Part C) will 

not be included in the calculation of the 

Medicare inpatient average length of 

stay specified under paragraph (e)(2)(i) 

of this section. The provisions of this 

paragraph (e)(3)(vi) do not apply to a 

hospital classified as a subsection (d) 

hospital (as defined in section 

1886(d)(1)(B) the Act) as of December 

10, 2013. 

* * * * * 

(6) * * * 

(ii) Exception. The moratorium 

specified in paragraph (e)(6)(i) of this 

section is not applicable to the 

establishment and classification of a 

long-term care hospital that meets the 

requirements of paragraphs (e) 

introductory text and (e)(1) through (5) 

of this section, or a long-term care 

hospital satellite facility that meets the 

requirements of § 412.22(h), if the longterm care hospital or long-term care 

satellite facility meets one or more of 

the following criteria on or before 

December 27, 2007, or prior to April 1, 

2014, as applicable: 

* * * * * 

■ 3. Section 412.64 is amended by 

revising paragraphs (d)(1)(vi), (h)(4) 

introductory text, and (h)(4)(vi) 

introductory text, to read as follows: 

§ 412.64 Federal rates for inpatient 

operating costs for Federal fiscal year 2005 

and subsequent fiscal years. 

* * * * * 

(d) * * * 

(1) * * * 

(vi) For fiscal years 2015 and 2016, 

the percentage increase in the market 

basket index (as defined in 

§ 413.40(a)(3) of this chapter) for 

prospective payment hospitals, subject 

to the provisions of paragraphs (d)(2) 

and (3) of this section, less a multifactor 

productivity adjustment (as determined 

by CMS) and less 0.2 percentage point. 

* * * * * 

(h) * * * 

(4) For discharges on or after October 

1, 2004 and before October 1, 2016, 


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CMS establishes a minimum wage index 

for each all-urban State, as defined in 

paragraph (h)(5) of this section. This 

minimum wage index value is 

computed using the following 

methodology: 

* * * * * 

(vi) For discharges on or after October 

1, 2012 and before October 1, 2016, the 

minimum wage index value for the State 

is the higher of the value determined 

under paragraph (h)(4)(iv) of this section 

or the value computed using the 

following alternative methodology: 

* * * * * 

■ 4. Section 412.106 is amended by 

revising paragraph (g)(1)(iii)(C) to read 

as follows: 

§ 412.106 Special treatment: Hospitals that 

serve a disproportionate share of lowincome patients. 

* * * * * 

(g) * * * 

(1) * * * 

(iii) * * * 

(C) For fiscal years 2014 and 2015, 

CMS will base its estimates of the 

amount of hospital uncompensated care 

on the most recent available data on 

utilization for Medicaid and Medicare 

SSI patients, as determined by CMS in 

accordance with paragraphs (b)(2)(i) and 

(b)(4) of this section. For fiscal year 

2016, CMS will base its estimates of the 

amount of hospital uncompensated care 

on utilization data for Medicaid and 

Medicare SSI patients, as determined by 

CMS in accordance with paragraphs 

(b)(2)(i) and (b)(4) of this section, using 

data on Medicaid utilization from 2012 

or 2011 cost reports from the most 

recent HCRIS database extract, the 2012 

cost report data submitted to CMS by 

IHS hospitals, and the most recent 

available data on Medicare SSI 

utilization. 

* * * * * 

■ 5. Section 412.302 is amended by 

revising paragraph (d)(4) to read as 

follows: 

§ 412.302 Introduction to capital costs. 

* * * * * 

(d) * * * 

(4) For cost reporting periods 

beginning before October 1, 2015, 

hospitals may elect the simplified cost 

allocation methodology under the terms 

and conditions provided in the 

instructions for CMS Form 2552. 

■ 6. Section 412.503 is amended by 

adding a definition of ‘‘Subsection (d) 

hospital’’ in alphabetical order, to read 

as follows: 

§ 412.503 Definitions. 

* * * * * 

Subsection (d) hospital means, for 

purposes of § 412.526, a hospital 

defined in section 1886(d)(1)(B) of the 

Social Security Act and includes any 

hospital that is located in Puerto Rico 

and that would be a subsection (d) 

hospital as defined in section 

1886(d)(1)(B) of the Social Security Act 

if it were located in one of the 50 States. 

* * * * * 

■ 7. Section 412.507 is revised to read 

as follows: 

§ 412.507 Limitation on charges to 

beneficiaries. 

(a) Prohibited charges. Except as 

provided in paragraph (b) of this 

section, a long-term care hospital may 

not charge a beneficiary for any covered 

services for which payment is made by 

Medicare, even if the hospital’s costs of 

furnishing services to that beneficiary 

are greater than the amount the hospital 

is paid under the prospective payment 

system. If Medicare has paid at the full 

LTCH prospective payment system 

standard Federal payment rate, that 

payment applies to the hospital’s costs 

for services furnished until the high-cost 

outlier threshold is met. If Medicare 

pays less than the full LTCH prospective 

payment system standard Federal 

payment rate and payment was not 

made at the site neutral payment rate, 

that payment only applies to the 

hospital’s costs for those costs or days 

used to calculate the Medicare payment. 

If Medicare has paid at the full site 

neutral payment rate, that payment 

applies to the hospital’s costs for 

services furnished until the high-cost 

outlier is met. 

(b) Permitted charges. (1) A long-term 

care hospital that receives a payment at 

the full LTCH prospective payment 

system standard Federal payment rate or 

the site neutral payment rate may only 

charge the Medicare beneficiary for the 

applicable deductible and coinsurance 

amounts under §§ 409.82, 409.83, and 

409.87 of this chapter, and for items and 

services as specified under § 489.20(a) 

of this chapter. 

(2) A long-term care hospital that 

receives a payment at less than the full 

LTCH prospective payment system 

standard Federal payment rate for a 

short-stay outlier case, in accordance 

with § 412.529 (which would not 

include any discharge paid at the site 

neutral payment rate), may only charge 

the Medicare beneficiary for the 

applicable deductible and coinsurance 

amounts under §§ 409.82, 409.83, and 

409.87 of this chapter, for items and 

services as specified under § 489.20(a) 

of this chapter, and for services 

provided during the stay that were not 

the basis for the short-stay adjusted 

payment. 

■ 8. Section 412.517 is amended by 

adding a new paragraph (c) to read as 

follows: 

§ 412.517 Revision of LTC–DRG group 

classifications and weighting factors. 

* * * * * 

(c) Beginning in FY 2016, the annual 

recalibration of the weighting factors 

described in paragraph (a) of this 

section is determined using long-term 

care hospital discharges described in 

§ 412.522(a)(2). 

■ 9. Section 412.521 is amended by 

revising paragraph (a)(2) to read as 

follows: 

§ 412.521 Basis of payment. 

(a) * * * 

(2) Except as provided for in 

§ 412.526, the amount of payment under 

the prospective payment system is 

based on either the long-term care 

hospital prospective payment system 

standard Federal payment rate 

established in accordance with 

§ 412.523, including adjustments 

described in § 412.525, or the site 

neutral payment rate established in 

accordance with § 412.522(c), or, if 

applicable during a transition period, 

the blend of the LTCH PPS standard 

Federal payment rate and the applicable 

site neutral payment rate described in 

§ 412.522(c)(3). 

* * * * * 

■ 10. A new § 412.522 is added to read 

as follows: 

§ 412.522 Application of site neutral 

payment rate. 

(a) General. For discharges in cost 

reporting periods beginning on or after 

October 1, 2015— 

(1) Except as provided for in 

paragraph (b) of this section, all 

discharges are paid based on the site 

neutral payment rate as determined 

under the provisions of paragraph (c) of 

this section. 

(2) Discharges that meet the criteria 

for exclusion from site neutral payment 

rate specified in paragraph (b) of this 

section are paid based on the standard 

Federal prospective payment rate 

established under § 412.523. 

(b) Criteria for exclusion from the site 

neutral payment rate—(1) General. A 

discharge that meets the following 

criteria is excluded from the site neutral 

payment rate specified under this 

section. 

(i) The discharge from the long-term 

care hospital does not have a principal 

diagnosis relating to a psychiatric 

diagnosis or to rehabilitation based on 

the LTC–DRG assignment of the 

discharge under § 412.513; and 


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(ii) The admission to the long-term 

care hospital was immediately preceded 

by a discharge from a subsection (d) 

hospital and meets either the intensive 

care unit criterion specified in 

paragraph (b)(2) of this section or the 

ventilator criterion specified in 

paragraph (b)(3) of this section. In order 

for an admission to a long-term care 

hospital to be considered immediately 

preceded for purposes of this section, 

the patient discharged from the 

subsection (d) hospital must be directly 

admitted to the long-term care hospital. 

(2) Intensive care unit criterion. In 

addition to meeting the requirements of 

paragraph (b)(1) of this section, the 

discharge from the subsection (d) 

hospital that immediately preceded the 

admission to the long-term care hospital 

includes at least 3 days in an intensive 

care unit (as defined in § 413.53(d) of 

this chapter), as evidenced by at least 

one of the revenue center codes on the 

claim for the discharge that indicate 

such services were provided for the 

requisite number of days during the 

stay. 

(3) Ventilator criterion. In addition to 

meeting the requirements of paragraph 

(b)(1) of this section, the discharge from 

the long-term care hospital is assigned 

to a LTC–DRG based on the patient’s 

receipt of ventilator services of at least 

96 hours, as evidenced by the procedure 

code on the discharge bill indicating 

such services were provided during the 

stay. 

(c) Site neutral payment rate—(1) 

General. Subject to the provisions of 

paragraph (c)(2) of this section, the site 

neutral payment rate is the lower of— 

(i) The inpatient hospital prospective 

payment system comparable per diem 

amount determined under 

§ 412.529(d)(4), including any 

applicable outlier payments specified in 

§ 412.525(a); or 

(ii) 100 percent of the estimated cost 

of the case determined under the 

provisions of § 412.529(d)(2). The 

provisions for cost- to-charge ratios at 

§ 412.529(f)(4)(i) through (iii) apply to 

the calculation of the estimated cost of 

the case under this paragraph. 

(2) Adjustments. CMS adjusts the 

payment rate determined under 

paragraph (c)(1) of this section to 

account for— 

(i) Outlier payments, by applying a 

reduction factor equal to the estimated 

proportion of outlier payments under 

§ 412.525(a) payable for discharges from 

a long-term care hospital described in 

paragraph (a)(1) of this section to total 

estimated payments under the long-term 

care hospital prospective payment 

system to discharges from a long-term 

care hospital described in paragraph 

(a)(1) of this section. 

(ii) A 3-day or less interruption of a 

stay and a greater than 3-day 

interruption of a stay, as provided for in 

§ 412.531. For purposes of the 

application of the provisions of 

§ 412.531 to discharges from a long-term 

care hospital described under paragraph 

(a)(1) of this section, the long-term care 

hospital prospective payment system 

standard Federal payment-related terms, 

such as ‘‘LTC–DRG payment,’’ ‘‘full 

Federal LTC–DRG prospective 

payment,’’ and ‘‘Federal prospective 

payment,’’ mean the site neutral 

payment rate calculated under 

paragraph (c) of this section. 

(iii) The special payment provisions 

for long-term care hospitals-withinhospitals and satellite facilities of longterm care hospitals specified in 

§ 412.534. 

(iv) The special payment provisions 

for long-term care hospitals and satellite 

facilities of long-term care hospitals that 

discharged Medicare patients admitted 

from a hospital not located in the same 

building or on the same campus as the 

long-term care hospital or satellite 

facility of the long-term care hospital, as 

provided in § 412.536. 

(3) Transition. For discharges in cost 

reporting periods beginning on or after 

October 1, 2015 and on or before 

September 30, 2017, payment for 

discharges under paragraph (c)(1) of this 

section are made using a blended 

payment rate, which is determined as— 

(i) 50 percent of the site neutral 

payment rate amount for the discharge 

as determined under paragraph (c)(1) of 

this section; and 

(ii) 50 percent of the standard Federal 

prospective payment rate amount for the 

discharge as determined under 

§ 412.523. 

(4) Reconciliation of payments under 

the site neutral payment rate. Payments 

under paragraph (c) of this section are 

reconciled in accordance with the 

following provisions: 

(i) Any reconciliation of payments 

under the site neutral payment rate is 

based on the cost-to-charge ratio 

calculated based on a ratio of costs to 

charges computed from the relevant cost 

report and charge data determined at the 

time the cost report coinciding with the 

discharge is settled. 

(ii) At the time of any reconciliation 

under paragraph (c)(4)(i) of this section, 

payments under the site neutral 

payment rate may be adjusted to 

account for the time value of any 

underpayments or overpayments. Any 

adjustment is based upon a widely 

available index to be established in 

advance by the Secretary, and is applied 

from the midpoint of the cost reporting 

period to the date of reconciliation. 

(d) Discharge payment percentage. (1) 

For purposes of this section, the 

discharge payment percentage is a ratio, 

expressed as a percentage, of Medicare 

discharges that meet the criteria for 

exclusion from the site neutral payment 

rate as described under paragraph (a)(2) 

of this section to total Medicare 

discharges paid under this Subpart O 

during the cost reporting period. 

(2) CMS will inform each long-term 

care hospital of its discharge payment 

percentage, as determined under 

paragraph (d)(1) of this section, for each 

cost reporting period beginning on or 

after October 1, 2015. 

■ 11. Section 412.523 is amended by 

adding a new paragraph (c)(3)(xii) and 

revising paragraph (d)(1) to read as 

follows: 

§ 412.523 Methodology for calculating the 

Federal prospective payment rates. 

* * * * * 

(c) * * * 

(3) * * * 

(xii) For long-term care hospital 

prospective payment system fiscal year 

beginning October 1, 2015, and ending 

September 30, 2016. The LTCH PPS 

standard Federal payment rate for the 

long-term care hospital prospective 

payment system beginning October 1, 

2015, and ending September 30, 2016, is 

the standard Federal payment rate for 

the previous long-term care hospital 

prospective payment system fiscal year 

updated by 1.9 percent, and further 

adjusted, as appropriate, as described in 

paragraph (d) of this section. 

* * * * * 

(d) * * * 

(1) Outlier payments. CMS adjusts the 

LTCH PPS standard Federal payment 

rate by a reduction factor of 8 percent, 

the estimated proportion of outlier 

payments under § 412.525(a) payable for 

discharges described in § 412.522(a)(2). 

* * * * * 

■ 12. Section 412.525 is amended by 

revising paragraphs (a)(1), (2), and (3) 

and adding a new paragraph (a)(5), to 

read as follows: 

§ 412.525 Adjustments to the Federal 

prospective payment. 

(a) * * * 

(1) CMS provides for an additional 

payment to a long-term care hospital if 

its estimated costs for a patient exceed 

the applicable long-term care hospital 

prospective payment system payment 

plus an applicable fixed-loss amount. 

For each long-term care hospital 

prospective payment system payment 

year, CMS annually establishes a fixedloss amount that is the maximum loss 


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that a long-term care hospital would 

incur under the applicable prospective 

payment system rate for a case with 

unusually high costs before receiving an 

additional payment. 

(2) The fixed-loss amount for 

discharges from a long-term care 

hospital described under § 412.522(a)(2) 

is determined for the long-term care 

hospital prospective payment system 

payment year, using the LTC–DRG 

relative weights that are in effect at the 

start of the applicable long-term care 

hospital prospective payment system 

payment year. 

(3) The additional payment equals 80 

percent of the difference between the 

estimated cost of the patient’s care 

(determined by multiplying the 

hospital-specific cost-to-charge ratio by 

the Medicare allowable covered charge) 

and the sum of the applicable long-term 

care hospital prospective payment 

system payment and the applicable 

fixed-loss amount. 

* * * * * 

(5) For purposes of this paragraph 

(a)— 

(i) Applicable long-term care hospital 

prospective payment system payment 

means: 

(A) The site neutral payment rate 

established under § 412.522(c) for longterm care hospital discharges described 

under § 412.522(a)(1); or 

(B) The standard Federal prospective 

payment rates established under 

§ 412.523 for long-term care hospital 

discharges described under 

§ 412.522(a)(2). 

(ii) Applicable fixed-loss amount 

means: 

(A) For long-term care hospital 

discharges described under 

§ 412.522(a)(1), the fixed-loss amount 

established for such cases as provided at 

§ 412.522(c)(2)(i). 

(B) For long-term care hospital 

discharges described under 

§ 412.522(a)(2), the fixed-loss amount 

established for such cases as provided at 

§ 412.523(e). 

* * * * * 

■ 13. A new § 412.560 is added to read 

as follows: 

§ 412.560 Participation, data submission, 

and other requirements under the LongTerm Care Hospital Quality Reporting 

(LTCHQR) Program. 

(a) Participation in the LTCHQR 

Program. A long-term-care hospital 

must begin submitting quality data 

under the LTCHQR Program by no later 

than the first day of the calendar quarter 

subsequent to 30 days after the date on 

its CMS Certification Number (CCN) 

notification letter. 

(b) Submission of data requirements 

and payment impact. (1) Except as 

provided in paragraph (c) of this 

section, a long-term care hospital must 

submit to CMS data on measures 

specified under sections 1886(m)(5)(D), 

1899B(c)(1), and 1899B(d)(1) of the Act, 

as applicable, in a form and manner, 

and at a time, specified by CMS. 

(2) A long-term care hospital that does 

not submit data in accordance with 

sections 1886(m)(5)(C) and 

1886(m)(5)(F) of the Act with respect to 

a given fiscal year will have its annual 

update to the standard Federal rate for 

discharges for the long-term care 

hospital during the fiscal year reduced 

by 2 percentage points. 

(c) Exception and extension request 

requirements. Upon request by a longterm care hospital, CMS may grant an 

exception or extension with respect to 

the quality data reporting requirements, 

for one or more quarters, in the event of 

certain extraordinary circumstances 

beyond the control of the long-term care 

hospital, subject to the following: 

(1) A long-term care hospital that 

wishes to request an exception or 

extension with respect to quality data 

reporting requirements must submit its 

request to CMS within 30 days of the 

date that the extraordinary 

circumstances occurred. 

(2) A long-term care hospital must 

submit its request for an exception or 

extension to CMS via email. Email is the 

only form that may be used to submit 

to CMS a request for an exception or an 

extension. 

(3) The email request for an exception 

or extension must contain the following 

information: 

(i) The CCN for the long-term care 

hospital. 

(ii) The business name of the longterm care hospital. 

(iii) The business address of the longterm care hospital. 

(iv) Contact information for the longterm care hospital’s chief executive 

officer or designated personnel, 

including the name, telephone number, 

title, email address, and physical 

mailing address. (The mailing address 

may not be a post office box.) 

(v) A statement of the reason for the 

request for the exception or extension. 

(vi) Evidence of the impact of the 

extraordinary circumstances, including, 

but not limited to, photographs, 

newspaper articles, and other media. 

(vii) The date on which the long-term 

care hospital will be able to again 

submit quality data under the LTCHQR 

Program and a justification for the 

proposed date. 

(4) CMS may grant an exception or 

extension to a long-term care hospital 

that has not been requested by the longterm care hospital if CMS determines 

that— 

(i) An extraordinary circumstance 

affects an entire region or locale; or 

(ii) A systemic problem with one of 

CMS’ data collection systems directly 

affected the ability of the long-term care 

hospital to submit quality data. 

(d) Reconsiderations of 

noncompliance decisions—(1) Written 

notification of noncompliance decision. 

CMS will send a long-term care hospital 

written notification of a decision of 

noncompliance with the quality data 

reporting requirements for a particular 

fiscal year. CMS also will use the 

Quality Improvement and Evaluation 

system (QIES) Assessment Submission 

and Processing (ASAP) System to 

provide notification of noncompliance 

to the long-term care hospital. 

(2) Request for reconsideration of 

noncompliance decision. A long-term 

care hospital may request a 

reconsideration of CMS’ decision of 

noncompliance no later than 30 

calendar days from the date of the 

written notification of noncompliance. 

The reconsideration request by the longterm care hospital must be submitted to 

CMS via email and must contain the 

following information: 

(i) The CCN for the long-term care 

hospital. 

(ii) The business name of the longterm care hospital. 

(iii) The business address of the longterm care hospital. 

(iv) Contact information for the longterm care hospital’s chief executive 

officer or designated personnel, 

including each individual’s name, title, 

email address, telephone number, and 

physical mailing address. (The physical 

address may not be a post office box.) 

(v) CMS’s identified reason(s) for the 

noncompliance decision from the 

written notification of noncompliance. 

(vi) The reason for requesting 

reconsideration of CMS’ noncompliance 

decision. 

(vii) Accompanying documentation 

that demonstrates compliance of the 

long-term care hospital with the quality 

reporting requirements. This 

documentation must be submitted 

electronically at the same time as the 

reconsideration request as an 

attachment to the email. Any 

reconsideration request that fails to 

provide sufficient evidence of 

compliance will not be reviewed. 

(3) CMS decision on reconsideration 

request. CMS will notify the long-term 

care hospital, in writing, of its final 

decision regarding any reconsideration 

request. CMS also will use the QIES 

ASAP System to provide notice of its 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24625 

final decision on the reconsideration 

request. 

(e) Appeals of reconsideration 

requests. A long-term care hospital that 

is dissatisfied with a decision made by 

CMS on its reconsideration request may 

file an appeal with the Provider 

Reimbursement Review Board under 

part 405, subpart R, of this chapter. 

For the reasons stated in the 

preamble, the Department of Health and 

Human Services proposes to further 

amend 45 CFR part 170 as previously 

proposed to be amended on March 30, 

2015 (80 FR 16902) as follows: 

Title 45—Public Welfare 

PART 170—HEALTH INFORMATION 

TECHNOLOGY STANDARDS, 

IMPLEMENTATION SPECIFICATIONS, 

AND CERTIFICATION CRITERIA AND 

CERTIFICATION PROGRAMS FOR 

HEALTH INFORMATION 

TECHNOLOGY 

■ 14. The authority citation for part 170 

continues to read as follows: 

Authority: 42 U.S.C. 300jj–11; 42 

U.S.C.300jj–14; 5 U.S.C. 552. 

■ 15. Section 170.315 as proposed to be 

added on March 30, 2015 (80 FR 16905) 

is amended by adding paragraph (c)(3) 

to read as follows: 

§ 170.315 2015 Edition health IT 

certification criteria. 

* * * * * 

(c) * * * 

(3) Clinical quality measures—report. 

Enable a user to electronically create a 

data file for transmission of clinical 

quality measurement data: 

(i) Mandatory. At a minimum, in 

accordance with the standards specified 

in § 170.205(h) and § 170.205(k) of this 

chapter; and 

(ii) Optional. That can be 

electronically accepted by CMS. 

* * * * * 

Dated: April 13, 2015. 

Andrew M. Slavitt, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Dated: April 15, 2015. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

Note: The following Addendum and 

Appendixes will not appear in the Code of 

Federal Regulations. 

Addendum—Proposed Schedule of 

Standardized Amounts, Update 

Factors, Rate-of-Increase Percentages 

Effective With Cost Reporting Periods 

Beginning on or After October 1, 2015, 

and Payment Rates for LTCHs Effective 

for Discharges Occurring on or After 

October 1, 2015 

I. Summary and Background 

In this Addendum, we are setting forth a 

description of the methods and data we used 

to determine the proposed prospective 

payment rates for Medicare hospital inpatient 

operating costs and Medicare hospital 

inpatient capital-related costs for FY 2016 for 

acute care hospitals. We also are setting forth 

the rate-of-increase percentage for updating 

the target amounts for certain hospitals 

excluded from the IPPS for FY 2016. We note 

that, because certain hospitals excluded from 

the IPPS are paid on a reasonable cost basis 

subject to a rate-of-increase ceiling (and not 

by the IPPS), these hospitals are not affected 

by the proposed figures for the standardized 

amounts, offsets, and budget neutrality 

factors. Therefore, in this proposed rule, we 

are setting forth the rate-of-increase 

percentage for updating the target amounts 

for certain hospitals excluded from the IPPS 

that are effective for cost reporting periods 

beginning on or after October 1, 2015. 

In addition, we are setting forth a 

description of the methods and data we used 

to determine the proposed standard Federal 

rate that would be applicable to Medicare 

LTCHs for FY 2016. 

In general, except for SCHs and hospitals 

located in Puerto Rico, for FY 2016, each 

hospital’s payment per discharge under the 

IPPS is based on 100 percent of the Federal 

national rate, also known as the national 

adjusted standardized amount. This amount 

reflects the national average hospital cost per 

case from a base year, updated for inflation. 

SCHs are paid based on whichever of the 

following rates yields the greatest aggregate 

payment: The Federal national rate 

(including, as discussed in section IV.D. of 

the preamble of this proposed rule, 

uncompensated care payments under section 

1886(r)(2) of the Act); the updated hospitalspecific rate based on FY 1982 costs per 

discharge; the updated hospital-specific rate 

based on FY 1987 costs per discharge; the 

updated hospital-specific rate based on FY 

1996 costs per discharge; or the updated 

hospital-specific rate based on FY 2006 costs 

per discharge. 

We note that the MDH program expired for 

discharges beginning on April 1, 2015 under 

current law. 

For hospitals located in Puerto Rico, the 

payment per discharge is based on the sum 

of 25 percent of an updated Puerto Ricospecific rate based on average costs per case 

of Puerto Rico hospitals for the base year and 

75 percent of the Federal national rate. (We 

refer readers to section II.D.2. of this 

Addendum for a complete description.) 

As discussed in section II. of this 

Addendum, we are proposing to make 

changes in the determination of the 

prospective payment rates for Medicare 

inpatient operating costs for acute care 

hospitals for FY 2016. In section III. of this 

Addendum, we discuss our proposed policy 

changes for determining the prospective 

payment rates for Medicare inpatient capitalrelated costs for FY 2016. In section IV. of 

this Addendum, we are setting forth the rateof-increase percentage for determining the 

rate-of-increase limits for certain hospitals 

excluded from the IPPS for FY 2016. In 

section V. of this Addendum, we discuss 

proposed policy changes for determining the 

standard Federal rate for LTCHs paid under 

the LTCH PPS for FY 2016. The tables to 

which we refer in the preamble of this 

proposed rule are listed in section VI. of this 

Addendum and are available via the Internet 

on the CMS Web site. 

II. Proposed Changes to Prospective Payment 

Rates for Hospital Inpatient Operating Costs 

for Acute Care Hospitals for FY 2016 

The basic methodology for determining 

prospective payment rates for hospital 

inpatient operating costs for acute care 

hospitals for FY 2005 and subsequent fiscal 

years is set forth under § 412.64. The basic 

methodology for determining the prospective 

payment rates for hospital inpatient 

operating costs for hospitals located in Puerto 

Rico for FY 2005 and subsequent fiscal years 

is set forth under §§ 412.211 and 412.212. 

Below we discuss the factors we are 

proposing to use for determining the 

proposed prospective payment rates for FY 

2016. 

In summary, the proposed standardized 

amounts set forth in Tables 1A, 1B, and 1C 

that are listed and published in section VI. 

of this Addendum (and available via the 

Internet) reflect— 

• Equalization of the standardized 

amounts for urban and other areas at the 

level computed for large urban hospitals 

during FY 2004 and onward, as provided for 

under section 1886(d)(3)(A)(iv)(II) of the Act. 

• The labor-related share that is applied to 

the standardized amounts and Puerto Ricospecific standardized amounts to give the 

hospital the highest payment, as provided for 

under sections 1886(d)(3)(E) and 

1886(d)(9)(C)(iv) of the Act. For FY 2016, 

depending on whether a hospital submits 

quality data under the rules established in 

accordance with section 1886(b)(3)(B)(viii) of 

the Act (hereafter referred to as a hospital 

that submits quality data) and is a 

meaningful EHR user under section 

1886(b)(3)(B)(ix) of the Act (hereafter referred 

to as a hospital that is a meaningful EHR 

user), there are four possible applicable 

percentage increases that can be applied to 

the national standardized amount. We refer 

readers to section IV.A. of the preamble of 

this proposed rule for a complete discussion 

on the proposed FY 2016 inpatient hospital 

update. Below is a table with these four 

options: 


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FY 2016 

Hospital 

submitted 

quality data 

and is a 

meaningful 

EHR user 

Hospital 

submitted 

quality data 

and is NOT a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is NOT a 

meaningful 

HR user 

Proposed market basket rate-of-increase ....................................................... 2.7 2.7 2.7 2.7 

Proposed Adjustment for Failure to Submit Quality Data under Section 

1886(b)(3)(B)(viii) of the Act ........................................................................ 0.0 0.0 ¥0.675 ¥0.675 

Proposed Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ................................................................... 0.0 ¥1.35 0.0 ¥1.35 

Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......... ¥0.6 ¥0.6 ¥0.6 ¥0.6 

Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... ¥0.2 ¥0.2 ¥0.2 ¥0.2 

Proposed Applicable Percentage Increase Applied to Standardized Amount 1.9 0.55 1.225 ¥0.125 

• A proposed update of 1.9 percent to the 

Puerto Rico-specific standardized amount 

(that is, the proposed FY 2016 estimate of the 

market basket rate-of-increase of 2.7 percent 

less a proposed adjustment of 0.6 percentage 

point for MFP and less 0.2 percentage point), 

in accordance with section 1886(d)(9)(C)(i) of 

the Act, as amended by section 401(c) of 

Public Law 108–173, which sets the update 

to the Puerto Rico-specific standardized 

amount equal to the applicable percentage 

increase set forth under section 

1886(b)(3)(B)(i) of the Act. 

• An adjustment to the standardized 

amount to ensure budget neutrality for DRG 

recalibration and reclassification, as provided 

for under section 1886(d)(4)(C)(iii) of the Act. 

• An adjustment to ensure the wage index 

changes are budget neutral, as provided for 

under section 1886(d)(3)(E)(i) of the Act. We 

note that section 1886(d)(3)(E)(i) of the Act 

requires that when we compute such budget 

neutrality, we assume that the provisions of 

section 1886(d)(3)(E)(ii) of the Act (requiring 

a 62 percent labor-related share in certain 

circumstances) had not been enacted. 

• An adjustment to ensure the effects of 

geographic reclassification are budget 

neutral, as provided for under section 

1886(d)(8)(D) of the Act, by removing the FY 

2015 budget neutrality factor and applying a 

revised factor. 

• As discussed below and in section III.G. 

of the preamble of this proposed rule, an 

adjustment to offset the cost of the 3-year 

hold harmless transitional wage index 

provisions provided by CMS as a result of the 

implementation of the new OMB labor 

market area delineations (beginning with FY 

2015). 

• An adjustment to ensure the effects of 

the rural community hospital demonstration 

program required under section 410A of 

Public Law 108–173, as amended by sections 

3123 and 10313 of Public Law 111–148, 

which extended the demonstration program 

for an additional 5 years, are budget neutral 

as required under section 410A(c)(2) of 

Public Law 108–173. 

• An adjustment to remove the FY 2015 

outlier offset and apply an offset for FY 2016, 

as provided for under section 1886(d)(3)(B) of 

the Act. 

• As discussed below and in section II.D. 

of the preamble of this proposed rule, a 

recoupment to meet the requirements of 

section 631 of ATRA to adjust the 

standardized amount to offset the estimated 

amount of the increase in aggregate payments 

as a result of not completing the prospective 

adjustment authorized under section 

7(b)(1)(A) of Public Law 110–90 until FY 

2013. 

For FY 2016, consistent with current law, 

we are applying the rural floor budget 

neutrality adjustment to hospital wage 

indexes. Also, consistent with section 3141 

of the Affordable Care Act, instead of 

applying a State level rural floor budget 

neutrality adjustment to the wage index, we 

are applying a uniform, national budget 

neutrality adjustment to the FY 2016 wage 

index for the rural floor. We note that, in 

section III.G.2.b. of the preamble to this 

proposed rule, we are proposing to extend 

the imputed floor policy (both the original 

methodology and alternative methodology) 

for another year, through September 30, 

2016. Therefore, for FY 2016, in this 

proposed rule, we are proposing to continue 

to include the imputed floor (calculated 

under the original and alternative 

methodologies) in calculating the uniform, 

national rural floor budget neutrality 

adjustment, which would be reflected in the 

FY 2016 wage index. 

A. Calculation of the Proposed Adjusted 

Standardized Amount 

1. Standardization of Base-Year Costs or 

Target Amounts 

In general, the national standardized 

amount is based on per discharge averages of 

adjusted hospital costs from a base period 

(section 1886(d)(2)(A) of the Act), updated 

and otherwise adjusted in accordance with 

the provisions of section 1886(d) of the Act. 

For Puerto Rico hospitals, the Puerto Ricospecific standardized amount is based on per 

discharge averages of adjusted target amounts 

from a base period (section 1886(d)(9)(B)(i) of 

the Act), updated and otherwise adjusted in 

accordance with the provisions of section 

1886(d)(9) of the Act. The September 1, 1983 

interim final rule (48 FR 39763) contained a 

detailed explanation of how base-year cost 

data (from cost reporting periods ending 

during FY 1981) were established for urban 

and rural hospitals in the initial development 

of standardized amounts for the IPPS. The 

September 1, 1987 final rule (52 FR 33043 

and 33066) contains a detailed explanation of 

how the target amounts were determined and 

how they are used in computing the Puerto 

Rico rates. 

Sections 1886(d)(2)(B) and 1886(d)(2)(C) of 

the Act requires us to update base-year per 

discharge costs for FY 1984 and then 

standardize the cost data in order to remove 

the effects of certain sources of cost 

variations among hospitals. These effects 

include case-mix, differences in area wage 

levels, cost-of-living adjustments for Alaska 

and Hawaii, IME costs, and costs to hospitals 

serving a disproportionate share of lowincome patients. 

For FY 2016, we are proposing to continue 

to use the national and Puerto Rico-specific 

labor-related and nonlabor-related shares 

(which are based on the FY 2010-based 

hospital market basket) that were used in FY 

2015. Specifically, under section 

1886(d)(3)(E) of the Act, the Secretary 

estimates, from time to time, the proportion 

of payments that are labor-related and adjusts 

the proportion (as estimated by the Secretary 

from time to time) of hospitals’ costs which 

are attributable to wages and wage-related 

costs of the DRG prospective payment rates. 

We refer to the proportion of hospitals’ costs 

that are attributable to wages and wagerelated costs as the ‘‘labor-related share.’’ For 

FY 2016, as discussed in section III. of the 

preamble of this proposed rule, we are 

proposing to continue to use a labor-related 

share of 69.6 percent for the national 

standardized amounts, and 63.2 percent for 

the Puerto Rico-specific standardized 

amount, if the hospital has a wage index 

value that is greater than 1.0000. Consistent 

with section 1886(d)(3)(E) of the Act, we are 

proposing to apply the wage index to a laborrelated share of 62 percent of the national 

standardized amount for all IPPS hospitals 

whose wage index values are less than or 

equal to 1.0000. For all IPPS hospitals whose 

wage indexes are greater than 1.0000, we are 

proposing to apply the wage index to a laborrelated share of 69.6 percent of the national 

standardized amount. 

For FY 2016, all Puerto Rico hospitals have 

a proposed wage index value that is less than 

1.0000 because the proposed average hourly 

rate of every hospital in Puerto Rico divided 

by the proposed national average hourly rate 

(the sum of all salaries and hours for all 

hospitals in the 50 United States and Puerto 

Rico) results in a wage index that is below 

1.0000. However, when we divide the 

proposed average hourly rate of every 

hospital located in Puerto Rico by the 

proposed Puerto Rico-specific national 

average hourly rate (the sum of all salaries 

and hours for all hospitals located only in 

Puerto Rico), the result is a proposed Puerto 

Rico-specific wage index value for some 

hospitals that is either above, or below 


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1.0000, depending on the hospital’s location 

within Puerto Rico. Therefore, for hospitals 

located in Puerto Rico, we are proposing to 

apply a labor-related share of 63.2 percent if 

its Puerto Rico-specific wage index is greater 

than 1.0000. For hospitals located in Puerto 

Rico whose Puerto Rico-specific wage index 

values are less than or equal to 1.0000, we 

are proposing to apply a labor share of 62 

percent. 

The proposed standardized amounts for 

operating costs appear in Tables 1A, 1B, and 

1C that are listed and published in section 

VI. of the Addendum to this proposed rule 

and are available via the Internet on the CMS 

Web site. 

2. Computing the National Average 

Standardized Amount and Puerto RicoSpecific Standardized Amount 

Section 1886(d)(3)(A)(iv)(II) of the Act 

requires that, beginning with FY 2004 and 

thereafter, an equal standardized amount be 

computed for all hospitals at the level 

computed for large urban hospitals during FY 

2003, updated by the applicable percentage 

update. Section 1886(d)(9)(A)(ii)(II) of the 

Act equalizes the Puerto Rico-specific urban 

and rural area rates. Accordingly, we are 

proposing to calculate the FY 2016 national 

average standardized amount and Puerto 

Rico-specific standardized amount 

irrespective of whether a hospital is located 

in an urban or rural location. 

3. Updating the National Average 

Standardized Amount and Puerto RicoSpecific Standardized Amount 

Section 1886(b)(3)(B) of the Act specifies 

the applicable percentage increase used to 

update the standardized amount for payment 

for inpatient hospital operating costs. We 

note that, in compliance with section 404 of 

the MMA, in this proposed rule, we are 

proposing to use the revised and rebased FY 

2010-based IPPS operating and capital 

market baskets for FY 2016 (which replaced 

the FY 2006-based IPPS operating and capital 

market baskets in FY 2014). As discussed in 

section IV.A. of the preamble of this 

proposed rule, in accordance with section 

1886(b)(3)(B) of the Act, as amended by 

section 3401(a) of the Affordable Care Act, 

we are proposing to reduce the FY 2016 

applicable percentage increase (which is 

based on IHS Global Insight, Inc.’s (IGI’s) first 

quarter 2015 forecast of the FY 2010-based 

IPPS market basket) by the MFP adjustment 

(the 10-year moving average of MFP for the 

period ending FY 2016) of 0.6 percentage 

point, which is calculated based on IGI’s first 

quarter 2015 forecast. 

In addition, in accordance with section 

1886(b)(3)(B)(i) of the Act, as amended by 

sections 3401(a) and 10319(a) of the 

Affordable Care Act, we are proposing to 

further update the standardized amount for 

FY 2016 by the estimated market basket 

percentage increase less 0.2 percentage point 

for hospitals in all areas. Sections 

1886(b)(3)(B)(xi) and (xii) of the Act, as 

added and amended by sections 3401(a) and 

10319(a) of the Affordable Care Act, further 

state that these adjustments may result in the 

applicable percentage increase being less 

than zero. The percentage increase in the 

market basket reflects the average change in 

the price of goods and services comprising 

routine, ancillary, and special care unit 

hospital inpatient services. 

Based on IGI’s 2015 first quarter forecast of 

the hospital market basket increase (as 

discussed in Appendix B of this proposed 

rule), the most recent forecast of the hospital 

market basket increase for FY 2016 is 2.7 

percent. As discussed above, for FY 2016, 

depending on whether a hospital submits 

quality data under the rules established in 

accordance with section 1886(b)(3)(B)(viii) of 

the Act and is a meaningful EHR user under 

section 1886(b)(3)(B)(ix) of the Act, there are 

four possible applicable percentage increases 

that could be applied to the standardized 

amount. We refer readers to section IV.A. of 

the preamble of this proposed rule for a 

complete discussion on the proposed FY 

2016 inpatient hospital update to the 

standardized amount. We also refer readers 

to the table above for the four possible 

applicable percentage increases that would 

be applied to update the national 

standardized amount. The proposed 

standardized amounts shown in Tables 1A 

through 1C that are published in section VI. 

of this Addendum and that are available via 

the Internet on the CMS Web site reflect 

these differential amounts. 

Section 401(c) of Public Law 108–173 

amended section 1886(d)(9)(C)(i) of the Act 

and states that, for discharges occurring in a 

fiscal year (beginning with FY 2004), the 

Secretary shall compute an average 

standardized amount for hospitals located in 

any area of Puerto Rico that is equal to the 

average standardized amount computed 

under subclause (I) for FY 2003 for hospitals 

in a large urban area (or, beginning with FY 

2005, for all hospitals in the previous fiscal 

year) increased by the applicable percentage 

increase under subsection (b)(3)(B) for the 

fiscal year involved. Therefore, the update to 

the Puerto Rico-specific operating 

standardized amount is subject to the 

applicable percentage increase set forth 

under section 1886(b)(3)(B)(i) of the Act, as 

amended by sections 3401(a) and 10319(a) of 

the Affordable Care Act (that is, the same 

update factor as for all other hospitals subject 

to the IPPS). Accordingly, we are proposing 

to establish an applicable percentage increase 

to the Puerto Rico-specific standardized 

amount of 1.9 percent for FY 2016. 

Although the update factors for FY 2016 

are set by law, we are required by section 

1886(e)(4) of the Act to recommend, taking 

into account MedPAC’s recommendations, 

appropriate update factors for FY 2016 for 

both IPPS hospitals and hospitals and 

hospital units excluded from the IPPS. 

Section 1886(e)(5)(A) of the Act requires that 

we publish our proposed recommendations 

in the Federal Register for public comment. 

Our recommendation on the update factors is 

set forth in Appendix B of this proposed rule. 

4. Other Adjustments to the Average 

Standardized Amount 

As in the past, we are proposing to adjust 

the FY 2016 standardized amount to remove 

the effects of the FY 2015 geographic 

reclassifications and outlier payments before 

applying the FY 2016 updates. We then 

apply budget neutrality offsets for outliers 

and geographic reclassifications to the 

standardized amount based on proposed FY 

2016 payment policies. 

We do not remove the prior year’s budget 

neutrality adjustments for reclassification 

and recalibration of the DRG relative weights 

and for updated wage data because, in 

accordance with sections 1886(d)(4)(C)(iii) 

and 1886(d)(3)(E) of the Act, estimated 

aggregate payments after updates in the DRG 

relative weights and wage index should equal 

estimated aggregate payments prior to the 

changes. If we removed the prior year’s 

adjustment, we would not satisfy these 

conditions. 

Budget neutrality is determined by 

comparing aggregate IPPS payments before 

and after making changes that are required to 

be budget neutral (for example, changes to 

MS–DRG classifications, recalibration of the 

MS–DRG relative weights, updates to the 

wage index, and different geographic 

reclassifications). We include outlier 

payments in the simulations because they 

may be affected by changes in these 

parameters. 

In order to appropriately estimate aggregate 

payments in our modeling, we make several 

inclusions and exclusions so that the 

appropriate universe of claims and charges 

are included. We discuss IME Medicare 

Advantage payment amounts, fee-for-service 

only claims, and charges for anti-hemophilic 

blood factor and organ acquisition below. 

Consistent with our methodology 

established in the FY 2011 IPPS/LTCH PPS 

final rule (75 FR 50422 through 50433), 

because IME Medicare Advantage payments 

are made to IPPS hospitals under section 

1886(d) of the Act, we believe these 

payments must be part of these budget 

neutrality calculations. However, we note 

that it is not necessary to include Medicare 

Advantage IME payments in the outlier 

threshold calculation or the outlier offset to 

the standardized amount because the statute 

requires that outlier payments be not less 

than 5 percent nor more than 6 percent of 

total ‘‘operating DRG payments,’’ which does 

not include IME and DSH payments. We refer 

readers to the FY 2011 IPPS/LTCH PPS final 

rule for a complete discussion on our 

methodology of identifying and adding the 

total Medicare Advantage IME payment 

amount to the budget neutrality adjustments. 

In addition, consistent with the 

methodology in the FY 2012 IPPS/LTCH PPS 

final rule, in order to ensure that we capture 

only fee-for-service claims, we are only 

including claims with a ‘‘Claim Type’’ of 60 

(which is a field on the MedPAR file that 

indicates a claim is a fee-for-service claim). 

Finally, consistent with our methodology 

established in the FY 2011 IPPS/LTCH PPS 

final rule (75 FR 50422 through 50423), we 

examined the MedPAR file and removed 

pharmacy charges for anti-hemophilic blood 

factor (which are paid separately under the 

IPPS) with an indicator of ‘‘3’’ for blood 

clotting with a revenue code of ‘‘0636’’ from 

the covered charge field for the budget 

neutrality adjustments. We also removed 

organ acquisition charges from the covered 

charge field for the budget neutrality 

adjustments because organ acquisition is a 

pass-through payment not paid under the 

IPPS. 


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The Bundled Payments for Care 

Improvement (BPCI) initiative, developed 

under the authority of section 3021 of the 

Affordable Care Act (codified at section 

1115A of the Act), is comprised of four 

broadly defined models of care, which link 

payments for multiple services beneficiaries 

receive during an episode of care. Under the 

BPCI initiative, organizations enter into 

payment arrangements that include financial 

and performance accountability for episodes 

of care. On January 31, 2013, CMS 

announced the first set of health care 

organizations selected to participate in the 

BPCI initiative. Additional organizations 

were selected in 2014. For additional 

information on the BPCI initiative, we refer 

readers to the CMS Center for Medicare and 

Medicaid Innovation’s Web site at: http://

innovation.cms.gov/initiatives/BundledPayments/index.html. 

In the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53341 through 53343), for FY 2013 

and subsequent fiscal years, we finalized a 

methodology to treat hospitals that 

participate in the BPCI initiative the same as 

prior fiscal years for the IPPS payment 

modeling and ratesetting process (which 

includes recalibration of the MS–DRG 

relative weights, ratesetting, calculation of 

the budget neutrality factors, and the impact 

analysis) without regard to a hospital’s 

participation within these bundled payment 

models (that is, as if they are not 

participating in those models under the BPCI 

initiative). For FY 2016, we are proposing to 

continue to include all applicable data from 

subsection (d) hospitals participating in BPCI 

Models 1, 2, and 4 in our IPPS payment 

modeling and ratesetting calculations. 

The Affordable Care Act established the 

Hospital Readmissions Reduction Program 

and the Hospital VBP Program which adjust 

payments to certain IPPS hospitals beginning 

with discharges on or after October 1, 2012. 

Because the adjustments made under these 

programs affect the estimation of aggregate 

IPPS payments, in this proposed rule, 

consistent with our methodology established 

in the FY 2013 IPPS/LTCH PPS final rule (77 

FR 53687 through 53688), we believe that it 

is appropriate to include adjustments for 

these programs within our budget neutrality 

calculations. We discuss the treatment of 

these two programs in the context of budget 

neutrality adjustments below. 

Section 1886(q) of the Act establishes the 

‘‘Hospital Readmissions Reduction Program’’ 

effective for discharges from an ‘‘applicable 

hospital’’ beginning on or after October 1, 

2012, under which payments to those 

hospitals under section 1886(d) of the Act are 

reduced to account for certain excess 

readmissions. Under the Hospital 

Readmissions Reduction Program, for 

discharges beginning on October 1, 2012 

discharges from an ‘‘applicable hospital’’ are 

paid at an amount equal to the product of the 

‘‘base operating DRG payment amount’’ and 

an ‘‘adjustment factor’’ that accounts for 

excess readmissions for the hospital for the 

fiscal year plus any applicable add-on 

payments. We refer readers to section IV.E. 

of the preamble of this proposed rule for full 

details of our proposed FY 2016 policy 

changes to the Hospital Readmissions 

Reduction Program. We also note that the 

Hospital Readmissions Reduction Program 

provided for under section 1886(q) of the Act 

is not budget neutral. 

Section 1886(o) of the Act requires the 

Secretary to establish a Hospital VBP 

Program under which, for discharges 

beginning on October 1, 2012, value-based 

incentive payments are made in a fiscal year 

to eligible subsection (d) hospitals based on 

their performance on measures established 

for a performance period for that fiscal year. 

As specified under section 1886(o)(7)(B)(i) of 

the Act, these value-based incentive 

payments are funded by a reduction applied 

to each eligible hospital’s base-operating DRG 

payment amount, for each discharge 

occurring in the fiscal year. As required by 

section 1886(o)(7)(A) of the Act, the total 

amount of allocated funds available for 

value-based incentive payments with respect 

to a fiscal year is equal to the total amount 

of base-operating DRG payment reductions, 

as estimated by the Secretary. In a given 

fiscal year, hospitals may earn a value-based 

incentive payment amount for a fiscal year 

that is greater than, equal to, or less than the 

reduction amount, based on their 

performance on quality measures under the 

Hospital VBP Program. Thus, the Hospital 

VBP Program is estimated to have no net 

effect on overall payments. We refer readers 

to section IV.F. of the preamble of this 

proposed rule for details regarding the 

Hospital VBP Program. 

Both the hospital readmissions payment 

adjustment (reduction) and the hospital VBP 

payment adjustment (redistribution) are 

applied on a claim-by-claim basis by 

adjusting, as applicable, the base-operating 

DRG payment amount for individual 

subsection (d) hospitals, which affects the 

overall sum of aggregate payments on each 

side of the comparison within the budget 

neutrality calculations. For example, when 

we calculate the budget neutrality factor for 

MS–DRG reclassification and recalibration of 

the relative weights, we compare aggregate 

payments estimated using the prior year’s 

GROUPER and relative weights to estimated 

payments using the new GROUPER and 

relative weights. (We refer readers to section 

II.A.4.a. of this Addendum for details.) Other 

factors, such as the DSH and IME payment 

adjustments, are the same on both sides of 

the comparison because we are only seeking 

to ensure that aggregate payments do not 

increase or decrease as a result of the changes 

of MS–DRG reclassification and recalibration. 

In order to properly determine aggregate 

payments on each side of the comparison, as 

we did for FY 2014 and FY 2015, for FY 2016 

and subsequent years, we are proposing to 

continue to apply the proposed hospital 

readmissions payment adjustment and the 

proposed hospital VBP payment adjustment 

on each side of the comparison, consistent 

with the methodology that we adopted in the 

FY 2013 IPPS/LTCH PPS final rule (77 FR 

53687 through 53688). That is, we are 

proposing to apply the proposed 

readmissions payment adjustment factor and 

the proposed hospital VBP payment 

adjustment factor on both sides of our 

comparison of aggregate payments when 

determining all budget neutrality factors 

described in section II.A.4. of this 

Addendum. 

For the purpose of calculating the 

proposed FY 2016 readmissions payment 

adjustment factors, we are proposing to use 

excess readmission ratios and aggregate 

payments for excess readmissions based on 

admissions from the prior fiscal year’s 

applicable period because hospitals have had 

the opportunity to review and correct these 

data before the data were made public under 

the policy we adopted regarding the 

reporting of hospital-specific readmission 

rates, consistent with section 1886(q)(6) of 

the Act. For FY 2016, in this proposed rule, 

we are proposing to calculate the 

readmissions payment adjustment factors 

using excess readmission ratios and aggregate 

payments for excess readmissions based on 

admissions from the finalized applicable 

period for FY 2016 as hospitals have had the 

opportunity to review and correct these data 

under our policy regarding the reporting of 

hospital-specific readmission rates consistent 

with section 1886(q)(6) of the Act. We 

discuss our proposed policy regarding the 

reporting of hospital-specific readmission 

rates for FY 2016 in section IV.E.3.f of the 

preamble of this proposed rule. (For 

additional information on our general policy 

for the reporting of hospital-specific 

readmission rates, consistent with section 

1886(q)(6) of the Act, we refer readers to the 

FY 2013 IPPS/LTCH PPS final rule (77 FR 

53399 through 53400).) 

In addition, for FY 2016, in this proposed 

rule, for the purpose of modeling aggregate 

payments when determining all budget 

neutrality factors, we are proposing to use 

proxy hospital VBP payment adjustment 

factors for FY 2016 that are based on data 

from a historical period because hospitals 

have not yet had an opportunity to review 

and submit corrections for their data from the 

FY 2016 performance period. (For additional 

information on our policy regarding the 

review and correction of hospital-specific 

measure rates under the Hospital VBP 

Program, consistent with section 

1886(o)(10)(A)(ii) of the Act, we refer readers 

to the FY 2013 IPPS/LTCH PPS final rule (77 

FR 53578 through 53581), the CY 2012 

OPPS/ASC final rule with comment period 

(76 FR 74544 through 74547), and the 

Hospital Inpatient VBP final rule (76 FR 

26534 through 26536).) 

The Affordable Care Act also established 

section 1886(r) of the Act, which modifies 

the methodology for computing the Medicare 

DSH payment adjustment beginning in FY 

2014. Beginning in FY 2014, IPPS hospitals 

receiving Medicare DSH payment 

adjustments will receive an empirically 

justified Medicare DSH payment equal to 25 

percent of the amount that would previously 

have been received under the statutory 

formula set forth under section 1886(d)(5)(F) 

of the Act governing the Medicare DSH 

payment adjustment. In accordance with 

section 1886(r)(2) of the Act, the remaining 

amount, equal to an estimate of 75 percent 

of what otherwise would have been paid as 

Medicare DSH payments, reduced to reflect 

changes in the percentage of individuals 

under age 65 who are uninsured and an 

additional statutory adjustment, will be 


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available to make additional payments to 

Medicare DSH hospitals based on their share 

of the total amount of uncompensated care 

reported by Medicare DSH hospitals for a 

given time period. In order to properly 

determine aggregate payments on each side 

of the comparison for budget neutrality, prior 

to FY 2014, we included estimated Medicare 

DSH payments on both sides of our 

comparison of aggregate payments when 

determining all budget neutrality factors 

described in section II.A.4. of this 

Addendum. 

To do this for FY 2016 (as we did for FY 

2014 and FY 2015), we are proposing to 

include estimated empirically justified 

Medicare DSH payments that will be paid in 

accordance with section 1886(r)(1) of the Act 

and estimates of the additional 

uncompensated care payments made to 

hospitals receiving Medicare DSH payment 

adjustments as described by section 

1886(r)(2) of the Act. That is, we are 

proposing to consider estimated empirically 

justified Medicare DSH payments at 25 

percent of what would otherwise have been 

paid, and also the estimated additional 

uncompensated care payments for hospitals 

receiving Medicare DSH payment 

adjustments on both sides of our comparison 

of aggregate payments when determining all 

budget neutrality factors described in section 

II.A.4. of this Addendum. 

We note that, when calculating total 

payments for budget neutrality, to determine 

total payments for SCHs, we model total 

hospital-specific rate payments and total 

Federal rate payments and then include 

whichever one of the total payments is 

greater. As discussed in section IV.D. of the 

preamble to this proposed rule and below, 

we are proposing to continue the FY 2014 

finalized methodology under which we 

would take into consideration 

uncompensated care payments in the 

comparison of payments under the Federal 

rate and the hospital-specific rate for SCHs. 

Therefore, we are proposing to include 

estimated uncompensated care payments in 

this comparison. 

In addition, we are proposing to include an 

adjustment to the standardized amount for 

those hospitals that are not meaningful EHR 

users in our modeling of aggregate payments 

for budget neutrality for FY 2016. We did not 

include this adjustment for FY 2015 because 

that was the first year hospitals experienced 

a reduction to their applicable percentage 

increase due to whether they are meaningful 

EHR users and data were not available at that 

time. However, we believe it is appropriate 

to include this adjustment for FY 2016 

because FY 2016 will be the second year for 

which hospitals will experience this 

reduction and data on the prior year’s 

performance are now available. Payments for 

hospitals would be estimated based on the 

proposed applicable standardized amount in 

Tables 1A and 1B for discharges occurring in 

FY 2016. 

a. Proposed Recalibration of MS–DRG 

Relative Weights and Updated Wage Index— 

Budget Neutrality Adjustment 

Section 1886(d)(4)(C)(iii) of the Act 

specifies that, beginning in FY 1991, the 

annual DRG reclassification and recalibration 

of the relative weights must be made in a 

manner that ensures that aggregate payments 

to hospitals are not affected. As discussed in 

section II.H. of the preamble of this proposed 

rule, we normalized the recalibrated MS– 

DRG relative weights by an adjustment factor 

so that the average case relative weight after 

recalibration is equal to the average case 

relative weight prior to recalibration. 

However, equating the average case relative 

weight after recalibration to the average case 

relative weight before recalibration does not 

necessarily achieve budget neutrality with 

respect to aggregate payments to hospitals 

because payments to hospitals are affected by 

factors other than average case relative 

weight. Therefore, as we have done in past 

years, we are proposing to make a budget 

neutrality adjustment to ensure that the 

requirement of section 1886(d)(4)(C)(iii) of 

the Act is met. 

Section 1886(d)(3)(E)(i) of the Act requires 

us to update the hospital wage index on an 

annual basis beginning October 1, 1993. This 

provision also requires us to make any 

updates or adjustments to the wage index in 

a manner that ensures that aggregate 

payments to hospitals are not affected by the 

change in the wage index. Section 

1886(d)(3)(E)(i) of the Act requires that we 

implement the wage index adjustment in a 

budget neutral manner. However, section 

1886(d)(3)(E)(ii) of the Act sets the laborrelated share at 62 percent for hospitals with 

a wage index less than or equal to 1.0000, 

and section 1886(d)(3)(E)(i) of the Act 

provides that the Secretary shall calculate the 

budget neutrality adjustment for the 

adjustments or updates made under that 

provision as if section 1886(d)(3)(E)(ii) of the 

Act had not been enacted. In other words, 

this section of the statute requires that we 

implement the updates to the wage index in 

a budget neutral manner, but that our budget 

neutrality adjustment should not take into 

account the requirement that we set the 

labor-related share for hospitals with wage 

indexes less than or equal to 1.0000 at the 

more advantageous level of 62 percent. 

Therefore, for purposes of this budget 

neutrality adjustment, section 1886(d)(3)(E)(i) 

of the Act prohibits us from taking into 

account the fact that hospitals with a wage 

index less than or equal to 1.0000 are paid 

using a labor-related share of 62 percent. 

Consistent with current policy, for FY 2016, 

we are proposing to adjust 100 percent of the 

wage index factor for occupational mix. We 

describe the occupational mix adjustment in 

section III.E. of the preamble of this proposed 

rule. 

For FY 2016, to comply with the 

requirement that MS–DRG reclassification 

and recalibration of the relative weights be 

budget neutral for the Puerto Rico 

standardized amount and the hospitalspecific rates, we used FY 2014 discharge 

data to simulate payments and compared the 

following: 

• Aggregate payments using the FY 2015 

labor-related share percentages, the FY 2015 

relative weights, and the FY 2015 prereclassified wage data, and applied the 

proposed FY 2016 hospital readmissions 

payment adjustments and estimated FY 2016 

hospital VBP payment adjustments; and 

• Aggregate payments using the FY 2015 

labor-related share percentages, the proposed 

FY 2016 relative weights, and the FY 2015 

pre-reclassified wage data, and applied the 

same proposed FY 2016 hospital 

readmissions payment adjustments and 

estimated FY 2016 hospital VBP payment 

adjustments applied above. 

Based on this comparison, we computed a 

proposed budget neutrality adjustment factor 

equal to 0.998335. As discussed in section 

IV. of this Addendum, we also are proposing 

to apply the MS–DRG reclassification and 

recalibration budget neutrality factor of 

0.998335 to the hospital-specific rates that 

are effective for cost reporting periods 

beginning on or after October 1, 2015. 

In order to meet the statutory requirements 

that we do not take into account the laborrelated share of 62 percent when computing 

wage index budget neutrality adjustment 

factor, it was necessary to use a three-step 

process to comply with the requirements that 

MS–DRG reclassification and recalibration of 

the relative weights and the updated wage 

index and labor-related share have no effect 

on aggregate payments for IPPS hospitals. 

Under the first step, we determined a 

proposed MS–DRG reclassification and 

recalibration budget neutrality adjustment 

factor of 0.998335 (by using the same 

methodology described above to determine 

the proposed MS–DRG reclassification and 

recalibration budget neutrality factor for the 

Puerto Rico standardized amount and 

hospital-specific rates). Under the second 

step, to compute a proposed budget 

neutrality adjustment factor for wage index 

and labor-related share percentage changes 

we used FY 2014 discharge data to simulate 

payments and compared the following: 

• Aggregate payments using the proposed 

FY 2016 relative weights and the FY 2015 

pre-reclassified wage indexes, applied the FY 

2015 labor-related share of 69.6 percent to all 

hospitals (regardless of whether the 

hospital’s wage index was above or below 

1.0000), and applied the proposed FY 2016 

hospital readmissions payment adjustment 

and the estimated FY 2016 hospital VBP 

payment adjustment; and 

• Aggregate payments using the proposed 

FY 2016 relative weights and the proposed 

FY 2016 pre-reclassified wage indexes, 

applied the proposed labor-related share for 

FY 2016 of 69.6 percent to all hospitals 

(regardless of whether the hospital’s wage 

index was above or below 1.0000), and 

applied the same proposed FY 2016 hospital 

readmissions payment adjustments and 

estimated FY 2016 hospital VBP payment 

adjustments applied above. 

In addition, we applied the proposed MS– 

DRG reclassification and recalibration budget 

neutrality adjustment factor (derived in the 

first step) to the payment rates that were used 

to simulate payments for this comparison of 

aggregate payments from FY 2015 to FY 

2016. By applying this methodology, we 

determined a proposed budget neutrality 

adjustment factor of 0.998681 for proposed 

changes to the wage index. Finally, we 

multiplied the proposed MS–DRG 

reclassification and recalibration budget 

neutrality adjustment factor of 0.998335 

(derived in the first step) by the proposed 


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budget neutrality adjustment factor of 

0.998681 for proposed changes to the wage 

index (derived in the second step) to 

determine the proposed MS–DRG 

reclassification and recalibration and 

updated wage index budget neutrality 

adjustment factor of 0.997018. 

b. Reclassified Hospitals—Proposed Budget 

Neutrality Adjustment 

Section 1886(d)(8)(B) of the Act provides 

that certain rural hospitals are deemed urban. 

In addition, section 1886(d)(10) of the Act 

provides for the reclassification of hospitals 

based on determinations by the MGCRB. 

Under section 1886(d)(10) of the Act, a 

hospital may be reclassified for purposes of 

the wage index. 

Under section 1886(d)(8)(D) of the Act, the 

Secretary is required to adjust the 

standardized amount to ensure that aggregate 

payments under the IPPS after 

implementation of the provisions of sections 

1886(d)(8)(B) and (C) and 1886(d)(10) of the 

Act are equal to the aggregate prospective 

payments that would have been made absent 

these provisions. We note that the wage 

index adjustments provided for under section 

1886(d)(13) of the Act are not budget neutral. 

Section 1886(d)(13)(H) of the Act provides 

that any increase in a wage index under 

section 1886(d)(13) shall not be taken into 

account in applying any budget neutrality 

adjustment with respect to such index under 

section 1886(d)(8)(D) of the Act. To calculate 

the proposed budget neutrality adjustment 

factor for FY 2016, we used FY 2014 

discharge data to simulate payments and 

compared the following: 

• Aggregate payments using the proposed 

FY 2016 labor-related share percentages, 

proposed FY 2016 relative weights and 

proposed FY 2016 wage data prior to any 

reclassifications under sections 1886(d)(8)(B) 

and (C) and 1886(d)(10) of the Act, and 

applied the proposed FY 2016 hospital 

readmissions payment adjustments and the 

estimated FY 2016 hospital VBP payment 

adjustments; and 

• Aggregate payments using the proposed 

FY 2016 labor-related share percentages, 

proposed FY 2016 relative weights, and 

proposed FY 2016 wage data after such 

reclassifications, and applied the same 

proposed FY 2016 hospital readmissions 

payment adjustments and the estimated FY 

2016 hospital VBP payment adjustments 

applied above. 

We note that the reclassifications applied 

under the second simulation and comparison 

are those listed in Table 2 associated with 

this proposed, which is available via the 

Internet on the CMS Web site. This table 

reflects reclassification crosswalks proposed 

for FY 2016, and apply the proposed policies 

explained in section III. of the preamble to 

this proposed rule. Based on these 

simulations, we calculated a proposed budget 

neutrality adjustment factor of 0.988486 to 

ensure that the effects of these provisions are 

budget neutral, consistent with the statute. 

The proposed FY 2016 budget neutrality 

adjustment factor was applied to the 

standardized amount after removing the 

effects of the FY 2015 budget neutrality 

adjustment factor. We note that the proposed 

FY 2016 budget neutrality adjustment reflects 

FY 2016 wage index reclassifications 

approved by the MGCRB or the 

Administrator at the time of development of 

the proposed rule. 

c. Proposed Rural Floor Budget Neutrality 

Adjustment 

Under § 412.64(e)(4), we make an 

adjustment to the wage index to ensure that 

aggregate payments after implementation of 

the rural floor under section 4410 of the BBA 

(Pub. L. 105–33) and the imputed floor under 

§ 412.64(h)(4) are equal to the aggregate 

prospective payments that would have been 

made in the absence of such provisions. 

Consistent with section 3141 of the 

Affordable Care Act and as discussed in 

section III.H. of the preamble of this 

proposed rule and codified at 

§ 412.64(e)(4)(ii), the budget neutrality 

adjustment for the rural and imputed floor is 

a national adjustment to the wage index. 

As noted above and as discussed in section 

III.H.2. of the preamble of this proposed rule, 

in the FY 2012 IPPS/LTCH PPS final rule, we 

extended the imputed floor calculated under 

the original methodology through FY 2013 

(76 FR 51594). In the FY 2013 IPPS/LTCH 

PPS final rule, we established an alternative 

methodology for calculating the imputed 

floor and established a policy that the 

minimum wage index value for an all-urban 

state would be the higher of the value 

determined under the original methodology 

or the value computed using the alternative 

methodology (77 FR 53368 through 53369). 

Consistent with the methodology for treating 

the imputed floor, similar to the methodology 

we used in the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53368 through 53369), we 

included this alternative methodology for 

computing the imputed floor index in the 

calculation of the uniform, national rural 

floor budget neutrality adjustment for FY 

2014. For FY 2015, as discussed in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 49969 

through 49971), we extended the imputed 

floor for another year using the higher of the 

value determined under the original 

methodology or the alternative methodology. 

As discussed in section III.H.2. of the 

preamble of this proposed rule, we are 

proposing to extend the imputed floor using 

the higher of the value determined under the 

original methodology or the alternative 

methodology for FY 2016. Therefore, in order 

to ensure that aggregate payments to 

hospitals are not affected, similar to prior 

years, we would follow our policy of 

including the proposed imputed floor in the 

proposed rural floor budget neutrality 

adjustment to the wage index. 

Under the new OMB labor market area 

delineations adopted beginning with the FY 

2015 wage indexes, New Jersey, Rhode 

Island, and Delaware are all-urban States. 

Therefore, for FY 2016, the proposed 

imputed floor was applied to the wage index 

for hospitals located in these three States. 

Similar to our calculation in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50369 

through 50370), for FY 2016, we are 

proposing to calculate a national rural Puerto 

Rico wage index (used to adjust the laborrelated share of the national standardized 

amount for hospitals located in Puerto Rico 

which receive 75 percent of the national 

standardized amount) and a rural Puerto 

Rico-specific wage index (which is used to 

adjust the labor-related share of the Puerto 

Rico-specific standardized amount for 

hospitals located in Puerto Rico that receive 

25 percent of the Puerto Rico-specific 

standardized amount). Because there are no 

rural Puerto Rico hospitals with established 

wage data, our calculation of the proposed 

FY 2016 rural Puerto Rico wage index is 

based on the policy adopted in the FY 2008 

IPPS final rule with comment period (72 FR 

47323). That is, we will use the unweighted 

average of the wage indexes from all CBSAs 

(urban areas) that are contiguous (share a 

border with) to the rural counties to compute 

the rural floor (72 FR 47323; 76 FR 51594). 

Under the new OMB labor market area 

delineations, except for Arecibo, Puerto Rico 

(CBSA 11640), all other Puerto Rico urban 

areas are contiguous to a rural area. 

Therefore, based on our existing policy, the 

proposed FY 2016 rural Puerto Rico wage 

index is calculated based on the average of 

the proposed FY 2016 wage indexes for the 

following urban areas: Aguadilla-Isabela, PR 

(CBSA 10380); Guayama, PR (CBSA 25020); 

Mayaguez, PR (CBSA 32420); Ponce, PR 

(CBSA 38660), San German, PR (CBSA 

41900) and San Juan-Carolina-Caguas, PR 

(CBSA 41980). 

To calculate the national rural floor and 

imputed floor budget neutrality adjustment 

factors and the Puerto Rico-specific rural 

floor budget neutrality adjustment factor, we 

are proposing to use FY 2014 discharge data 

to simulate payments and the proposed postreclassified national and Puerto Rico-specific 

wage indexes and compared the following: 

• The national and Puerto Rico-specific 

simulated payments without the proposed 

national rural floor and proposed imputed 

floor and proposed Puerto Rico-specific rural 

floor applied; and 

• The national and Puerto Rico-specific 

simulated payments with the proposed 

national rural floor and proposed imputed 

floor and proposed Puerto Rico-specific rural 

floor applied. 

Based on this comparison, we determined 

a proposed national rural budget neutrality 

adjustment factor of 0.990135 and the 

proposed Puerto Rico-specific budget 

neutrality adjustment factor of 0.987626. The 

national adjustment was applied to the 

national wage indexes to produce a proposed 

national rural floor budget neutral wage 

index and the proposed Puerto Rico-specific 

adjustment was applied to the Puerto Ricospecific wage indexes to produce a proposed 

Puerto Rico-specific rural floor budget 

neutral wage index. 

d. Wage Index Transition Budget Neutrality 

As discussed in section III.G. of the 

preamble of this proposed rule, in the past, 

we have provided for transition periods 

when adopting changes that have significant 

payment implications, particularly large 

negative impacts. 

Similar to FY 2005, for FY 2015, we 

determined that the transition to using the 

new OMB labor market area delineations 

would have the largest impact on hospitals 

that were located in an urban county that 

became rural under the new OMB 

delineations or hospitals deemed urban 


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where the urban area became rural under the 

new OMB delineations. To alleviate the 

decreased payments associated with having a 

rural wage index, in calculating the area 

wage index, similar to the transition 

provided in the FY 2005 IPPS final rule, we 

finalized a policy to generally assign these 

counties the urban wage index value of the 

CBSA to which they are physically located in 

for FY 2014 for FYs 2015, 2016, and 2017. 

Fiscal year 2016 will be the second year of 

this 3-year transition policy. We note that the 

1-year blended wage index transitional 

policy for all hospitals that would experience 

any decrease in their wage index value 

expires in FY 2015. 

As discussed in the FY 2015 IPPS/LTCH 

PPS final rule (79 FR 50372 through 50373), 

in the past, CMS has budget neutralized 

transitional wage indexes. We stated that 

because we established a policy that allows 

for the application of a transitional wage 

index only when it benefits the hospital, we 

believe that it would be appropriate to ensure 

that such a transitional policy does not 

increase aggregate Medicare payments 

beyond the payments that would be made 

had we simply adopted the OMB 

delineations without any transitional 

provisions. Therefore, as we did for FY 2015, 

for FY 2016, we are proposing to use our 

exceptions and adjustments authority under 

section 1886(d)(5)(I)(i) of the Act to make an 

adjustment to the national and Puerto Ricospecific standardized amounts to ensure that 

total payments for the effect of the 3-year 

transitional wage index provisions would 

equal what payments would have been if we 

had fully adopted the new OMB delineations 

without providing these transitional 

provisions. To calculate the proposed 

transitional wage index budget neutrality 

factor for FY 2016, we used FY 2014 

discharge data to simulate payments and 

compared the following: 

• Aggregate payments using the OMB 

delineations for FY 2016, the proposed FY 

2016 relative weights, proposed FY 2016 

wage data after such reclassifications under 

sections 1886(d)(8)(B) and (C) and 

1886(d)(10) of the Act, application of the 

proposed rural floor budget neutrality 

adjustment factor to the wage index, and 

application of the proposed FY 2016 hospital 

readmissions payment adjustments and the 

estimated FY 2016 hospital VBP payment 

adjustments; and 

• Aggregate payments using the OMB 

delineations for FY 2016, the proposed FY 

2016 relative weights, proposed FY 2016 

wage data after such reclassifications under 

sections 1886(d)(8)(B) and (C) and 

1886(d)(10) of the Act, application of the 

proposed rural floor budget neutrality 

adjustment factor to the wage index, 

application of the 3-year transitional wage 

indexes, and application of the same 

proposed FY 2016 hospital readmissions 

payment adjustments and the estimated FY 

2016 hospital VBP payment adjustments 

applied above. 

Based on these simulations, we calculated 

a proposed budget neutrality adjustment 

factor of 0.999995. Therefore, for FY 2016, 

we are proposing to apply a transitional wage 

index budget neutrality adjustment factor of 

0.999995 to the national average and Puerto 

Rico-specific standardized amounts to ensure 

that the effects of these proposed transitional 

wage indexes are budget neutral. 

We note that the proposed budget 

neutrality adjustment factor calculated above 

is based on the increase in payments in FY 

2016 that would result from the second year 

of the 3-year transitional wage index policies. 

Therefore, we are proposing to apply this 

proposed budget neutrality adjustment factor 

as a one-time adjustment to the FY 2016 

national and Puerto Rico-specific 

standardized amounts in order to offset the 

increase in payments in FY 2016 as a result 

of this second year of the 3-year transitional 

wage index. For subsequent fiscal years, we 

would not take into consideration the 

adjustment factor applied to the national and 

Puerto Rico-specific standardized amounts in 

the previous fiscal year’s update when 

calculating the current fiscal year transitional 

wage index budget neutrality adjustment 

factor (that is, this adjustment will not be 

applied cumulatively). 

e. Proposed Case-Mix Budget Neutrality 

Adjustment 

(1) Background 

Below we summarize the proposed 

recoupment adjustment to the FY 2016 

payment rates, as required by section 631 of 

ATRA, to account for the increase in 

aggregate payments as a result of not 

completing the prospective adjustment 

authorized under section 7(b)(1)(A) of Public 

Law 110–90 until FY 2013. We refer readers 

to section II.D. of the preamble of this 

proposed rule for a complete discussion 

regarding our proposed policies for FY 2016 

in this proposed rule and previously 

finalized policies (including our historical 

adjustments to the payment rates) relating to 

the effect of changes in documentation and 

coding that do not reflect real changes in 

case-mix. (2) Recoupment or Repayment 

Adjustment Authorized by Section 631 of the 

American Taxpayer Relief Act of 2012 

(ATRA) to the National Standardized 

Amount 

Section 631 of the ATRA amended section 

7(b)(1)(B) of Public Law 110–90 to require the 

Secretary to make a recoupment adjustment 

totaling $11 billion by FY 2017. Our actuaries 

estimated that if CMS were to fully account 

for the $11 billion recoupment required by 

section 631 of ATRA in FY 2014, a one-time 

¥9.3 percent adjustment to the standardized 

amount would be necessary. It is often our 

practice to delay or phase-in payment rate 

adjustments over more than 1 year, in order 

to moderate the effect on payment rates in 

any 1 year. Therefore, consistent with the 

policies that we have adopted in many 

similar cases, for FY 2014 and FY 2015, we 

applied a ¥0.8 percent adjustment to the 

standardized amount. For FY 2016, we are 

proposing to apply a ¥0.8 percent 

adjustment to the standardized amount. We 

note that, as section 631 of the ATRA 

instructs the Secretary to make a recoupment 

adjustment only to the standardized amount, 

this adjustment would not apply to the 

Puerto Rico-specific standardized amount 

and hospital-specific payment rates. 

f. Proposed Rural Community Hospital 

Demonstration Program Adjustment 

As discussed in section IV.I. of the 

preamble of this proposed rule, section 410A 

of Public Law 108–173 originally required 

the Secretary to establish a demonstration 

program that modifies reimbursement for 

inpatient services for up to 15 small rural 

hospitals. Section 410A(c)(2) of Public Law 

108–173 requires that in conducting the 

demonstration program under this section, 

the Secretary shall ensure that the aggregate 

payments made by the Secretary do not 

exceed the amount which the Secretary 

would have paid if the demonstration 

program under this section was not 

implemented. 

Sections 3123 and 10313 of the Affordable 

Care Act extended the demonstration 

program for an additional 5-year period, and 

allowed up to 30 hospitals to participate in 

20 States with low population densities 

determined by the Secretary. (In determining 

which States to include in the expansion, the 

Secretary is required to use the same criteria 

and data that the Secretary used to determine 

the States for purposes of the initial 5-year 

period.) In previous final rules, we have 

adjusted the national IPPS payment rates by 

an amount sufficient to account for the added 

costs of this demonstration program. In other 

words, we have applied budget neutrality 

across the payment system as a whole rather 

than merely across the participants of this 

demonstration program. We believe the 

language of the statutory budget neutrality 

requirement permits the agency to implement 

the budget neutrality provision in this 

manner. The statutory language requires that 

aggregate payments made by the Secretary do 

not exceed the amount which the Secretary 

would have paid if the demonstration was 

not implemented, but does not identify the 

range across which aggregate payments must 

be held equal. 

For FY 2016, we are proposing to adjust 

the national IPPS payment rates according to 

the proposed methodology set forth in 

section IV.I. of the preamble of this proposed 

rule, to account for the estimated additional 

costs of the demonstration program for FY 

2016. In addition, we are proposing to 

subtract from the budget neutrality offset 

amount for FY 2016 the amount by which the 

budget neutrality offset amount that was 

finalized in the FY 2009 IPPS final rule 

exceeds the actual costs of the demonstration 

for FY 2009 (as shown in the finalized cost 

reports for cost reporting periods beginning 

in FY 2009). The proposed total budget 

neutrality offset amount that we are 

proposing to be applied to the FY 2016 IPPS 

rates is $17,738,497. Accordingly, using the 

most recent data available to account for the 

estimated costs of the demonstration 

program, for FY 2016, we computed a 

proposed factor of 0.999808 for the rural 

community hospital demonstration program 

budget neutrality adjustment that will be 

applied to the IPPS standard Federal 

payment rate. 

g. Proposed Outlier Payments 

Section 1886(d)(5)(A) of the Act provides 

for payments in addition to the basic 

prospective payments for ‘‘outlier’’ cases 


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involving extraordinarily high costs. To 

qualify for outlier payments, a case must 

have costs greater than the sum of the 

prospective payment rate for the MS–DRG, 

any IME and DSH payments, any new 

technology add-on payments, and the 

‘‘outlier threshold’’ or ‘‘fixed-loss’’ amount (a 

dollar amount by which the costs of a case 

must exceed payments in order to qualify for 

an outlier payment). We refer to the sum of 

the prospective payment rate for the MS– 

DRG, any IME and DSH payments, any new 

technology add-on payments, and the outlier 

threshold as the outlier ‘‘fixed-loss cost 

threshold.’’ To determine whether the costs 

of a case exceed the fixed-loss cost threshold, 

a hospital’s CCR is applied to the total 

covered charges for the case to convert the 

charges to estimated costs. Payments for 

eligible cases are then made based on a 

marginal cost factor, which is a percentage of 

the estimated costs above the fixed-loss cost 

threshold. The marginal cost factor for FY 

2016 is 80 percent, the same marginal cost 

factor we have used since FY 1995 (59 FR 

45367). 

In accordance with section 

1886(d)(5)(A)(iv) of the Act, outlier payments 

for any year are projected to be not less than 

5 percent nor more than 6 percent of total 

operating DRG payments (which does not 

include IME and DSH payments) plus outlier 

payments. When setting the outlier 

threshold, we compute the 5.1 percent target 

by dividing the total operating outlier 

payments by the total operating DRG 

payments plus outlier payments. We do not 

include any other payments such as IME and 

DSH within the outlier target amount. 

Therefore, it is not necessary to include 

Medicare Advantage IME payments in the 

outlier threshold calculation. Section 

1886(d)(3)(B) of the Act requires the 

Secretary to reduce the average standardized 

amount by a factor to account for the 

estimated proportion of total DRG payments 

made to outlier cases. Similarly, section 

1886(d)(9)(B)(iv) of the Act requires the 

Secretary to reduce the average standardized 

amount applicable to hospitals located in 

Puerto Rico to account for the estimated 

proportion of total DRG payments made to 

outlier cases. More information on outlier 

payments may be found on the CMS Web site 

at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/

outlier.htm. 

(1) Proposed FY 2016 Outlier Fixed-Loss Cost 

Threshold 

In the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50977 through 50983), in response to 

public comments on the FY 2013 IPPS/LTCH 

PPS proposed rule, we made changes to our 

methodology for projecting the outlier fixedloss cost threshold for FY 2014. We refer 

readers to the FY 2014 IPPS/LTCH PPS final 

rule for detailed discussion of the changes. 

For FY 2016, we are proposing to continue 

to use the same methodology that we used in 

FY 2014 and FY 2015. As we have done in 

the past, to calculate the proposed FY 2016 

outlier threshold, we simulated payments by 

applying proposed FY 2016 payment rates 

and policies using cases from the FY 2014 

MedPAR file. Therefore, in order to 

determine the proposed FY 2016 outlier 

threshold, we inflated the charges on the 

MedPAR claims by 2 years, from FY 2014 to 

FY 2016. As discussed in the FY 2015 IPPS/ 

LTCH PPS final rule, we believe a 

methodology that is based on 1-year of charge 

data will provide a more stable measure to 

project the average charge per case because 

our prior methodology used a 6-month 

measure, which inherently uses fewer claims 

than a 1-year measure and makes it more 

susceptible to fluctuations in the average 

charge per case as a result of any significant 

charge increases or decreases by hospitals. 

In the FY 2015 IPPS/LTCH final rule (79 

FR 50375), we stated that commenters were 

concerned that they were unable to replicate 

the calculation of the charge inflation factor 

that CMS used in the proposed rule. In 

response to those comments, we stated that, 

consistent with our longstanding policy since 

FY 2005, we continue to believe that it is 

optimal to use the most recent period of 

charge data available to measure charge 

inflation. We also stated we would consider 

how best to provide additional information 

on the charge inflation factor for future years. 

In response to those comments, below we are 

providing a table that provides covered 

charges and cases by quarter in the periods 

used to calculate the charge inflation factor. 

Quarter 

Covered charges 

(January 1, 2013, 

hrough 

December 31, 2013) 

Cases 

(January 1, 2013, 

hrough 

December 31, 2013) 

Covered 

charges 

(January 1, 2014, 

through 

December 31, 2014) 

Cases 

(January 1, 2014, 

through 

December 31, 2014) 

1 ............................................................................... $126,534,546,428 2,640,744 $125,988,476,809 2,480,809 

2 ............................................................................... 118,741,812,697 2,507,483 121,297,544,913 2,433,390 

3 ............................................................................... 115,745,380,133 2,425,636 116,785,744,335 2,321,731 

4 ............................................................................... 119,331,676,066 2,406,770 89,923,763,220 1,764,002 

Total .................................................................. 480,353,415,324 9,980,633 453,995,529,277 8,999,932 

Under this new methodology, to compute 

the 1-year average annualized rate-of-change 

in charges per case for FY 2016, we are 

proposing to compare the average covered 

charge per case of $48,129 

($480,353,415,324/9,980,633) from the 

second quarter of FY 2013 through the first 

quarter of FY 2014 (January 1, 2013, through 

December 31, 2013) to the average covered 

charge per case of $50,444 

($453,995,529,277/8,999,932) from the 

second quarter of FY 2014 through the first 

quarter of FY 2015 (January 1, 2014, through 

December 31, 2014). This rate-of-change is 

4.8 percent (1.048116) or 9.8 percent 

(1.098547) over 2 years. 

As we have done in the past, in this FY 

2016 IPPS/LTCH PPS proposed rule, we are 

proposing to establish the proposed FY 2016 

outlier threshold using hospital CCRs from 

the December 2014 update to the ProviderSpecific File (PSF)—the most recent available 

data at the time of the development of this 

proposed rule. In the following instances, we 

substituted and used the proposed FY 2016 

statewide average operating and/or capital 

CCR instead of the operating and/or capital 

CCR from the PSF if a hospital’s operating 

and/or capital CCR is 0 or blank, if a 

hospital’s operating and/or capital CCR is 

above the ceilings described below. For FY 

2016, we also are proposing to continue to 

apply an adjustment factor to the CCRs to 

account for cost and charge inflation (as 

explained below). We are proposing that, if 

more recent data became available, we would 

use that data to calculate the final FY 2016 

outlier threshold. 

In the FY 2014 IPPS/LTCH PPS final rule 

(78 FR 50979), we adopted a new 

methodology to adjust the CCRs. Specifically, 

we finalized a policy to compare the national 

average case-weighted operating and capital 

CCR from the most recent update of the PSF 

to the national average case-weighted 

operating and capital CCR from the same 

period of the prior year. 

Therefore, as we did for FY 2014 and FY 

2015, for FY 2016, we are proposing to adjust 

the CCRs from the December 2014 update of 

the PSF by comparing the percentage change 

in the national average case-weighted 

operating CCR and capital CCR from the 

December 2013 update of the PSF to the 

national average case-weighted operating 

CCR and capital CCR from the December 

2014 update of the PSF. We note that we 

used total transfer-adjusted cases from FY 

2014 to determine the national average caseweighted CCRs for both sides of the 

comparison. As stated in the FY 2014 IPPS/ 

LTCH PPS final rule (78 FR 50979), we 

believe that it is appropriate to use the same 

case count on both sides of the comparison 

because this will produce the true percentage 

change in the average case-weighted 

operating and capital CCR from one year to 

the next without any effect from a change in 

case count on different sides of the 

comparison. 

Using the proposed methodology above, 

we calculated a proposed December 2013 

operating national average case-weighted 

CCR of 0.288792 and a proposed December 

2014 operating national average caseVerDate Sep<11>2014 18:20 Apr 29, 2015 Jkt 235001 PO 00000 Frm 00310 Fmt 4701 Sfmt 4702 E:\FR\FM\30APP2.SGM 30APP2

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weighted CCR of 0.280581. We then 

calculated the percentage change between the 

two national operating case-weighted CCRs 

by subtracting the December 2013 operating 

national average case-weighted CCR from the 

December 2014 operating national average 

case-weighted CCR and then dividing the 

result by the December 2013 national 

operating average case-weighted CCR. This 

resulted in a proposed national operating 

CCR adjustment factor of 0.971568. 

We used the same methodology proposed 

above to adjust the capital CCRs. Specifically, 

we calculated a December 2013 capital 

national average case-weighted CCR of 

0.025014 and a December 2014 capital 

national average case-weighted CCR of 

0.024500. We then calculated the percentage 

change between the two national capital 

case-weighted CCRs by subtracting the 

December 2013 capital national average caseweighted CCR from the December 2014 

capital national average case-weighted CCR 

and then dividing the result by the December 

2013 capital national average case-weighted 

CCR. This resulted in a proposed national 

capital CCR adjustment factor of 0.979474. 

Consistent with our methodology used in 

the past and as stated in the FY 2009 IPPS 

final rule (73 FR 48763), we continue to 

believe that it is appropriate to apply only a 

1-year adjustment factor to the CCRs. On 

average, it takes approximately 9 months for 

a MAC to tentatively settle a cost report from 

the fiscal year end of a hospital’s cost 

reporting period. The average ‘‘age’’ of 

hospitals’ CCRs from the time the MAC 

inserts the CCR in the PSF until the 

beginning of FY 2016 is approximately 1 

year. Therefore, as stated above, we believe 

a 1-year adjustment factor to the CCRs is 

appropriate. 

As discussed above, for FY 2016, we are 

proposing to apply the second year of the 3- 

year transitional wage index because of the 

adoption of the new OMB labor market area 

delineations. Also, as discussed in section 

III.B.3. of the preamble to the FY 2011 IPPS/ 

LTCH PPS final rule (75 FR 50160 and 

50161) and in section III.H.3. of the preamble 

of this proposed rule, in accordance with 

section 10324(a) of the Affordable Care Act, 

we created a wage index floor of 1.0000 for 

all hospitals located in States determined to 

be frontier States. We note that the frontier 

State floor adjustments would be calculated 

and applied after rural and imputed floor 

budget neutrality adjustments are calculated 

for all labor market areas, in order to ensure 

that no hospital in a frontier State would 

receive a wage index less than 1.0000 due to 

the proposed rural and imputed floor 

adjustment. In accordance with section 

10324(a) of the Affordable Care Act, the 

frontier State adjustment will not be subject 

to budget neutrality, and will only be 

extended to hospitals geographically located 

within a frontier State. However, for 

purposes of estimating the proposed outlier 

threshold for FY 2016, it was necessary to 

apply the proposed 3-year transitional wage 

indexes and adjust the proposed wage index 

of those eligible hospitals in a frontier State 

when calculating the proposed outlier 

threshold that results in outlier payments 

being 5.1 percent of total payments for FY 

2016. If we did not take the above into 

account, our estimate of total FY 2016 

payments would be too low, and, as a result, 

our proposed outlier threshold would be too 

high, such that estimated outlier payments 

would be less than our projected 5.1 percent 

of total payments. 

As we did in establishing the FY 2009 

outlier threshold (73 FR 57891), in our 

projection of FY 2016 outlier payments, we 

are proposing not to make any adjustments 

for the possibility that hospitals’ CCRs and 

outlier payments may be reconciled upon 

cost report settlement. We continue to 

believe that, due to the policy implemented 

in the June 9, 2003 Outlier final rule (68 FR 

34494), CCRs will no longer fluctuate 

significantly and, therefore, few hospitals 

will actually have these ratios reconciled 

upon cost report settlement. In addition, it is 

difficult to predict the specific hospitals that 

will have CCRs and outlier payments 

reconciled in any given year. We note that we 

have instructed MACs to identify for CMS 

any instances where (1) a hospital’s actual 

CCR for the cost reporting period fluctuates 

plus or minus 10 percentage points compared 

to the interim CCR used to calculate outlier 

payments when a bill is processed; and (2) 

the total outlier payments for the hospital 

exceeded $500,000.00 for that period. Our 

simulations assume that CCRs accurately 

measure hospital costs based on information 

available to us at the time we set the outlier 

threshold. For these reasons, we are 

proposing not to make any assumptions 

regarding the effects of reconciliation on the 

outlier threshold calculation. 

As described in sections IV.E. and IV.F. 

respectively, of the preamble of this proposed 

rule, sections 1886(q) and 1886(o) of the Act 

establish the Hospital Readmissions 

Reduction Program and the Hospital VBP 

Program, respectively. We do not believe that 

it is appropriate to include the hospital VBP 

payment adjustments and the hospital 

readmissions payment adjustments in the 

proposed outlier threshold calculation or the 

proposed outlier offset to the standardized 

amount. Specifically, consistent with our 

definition of the base operating DRG payment 

amount for the Hospital Readmissions 

Reduction Program under § 412.152 and the 

Hospital VBP Program under § 412.160, 

outlier payments under section 1886(d)(5)(A) 

of the Act are not affected by these payment 

adjustments. Therefore, outlier payments 

would continue to be calculated based on the 

unadjusted base DRG payment amount (as 

opposed to using the base-operating DRG 

payment amount adjusted by the hospital 

readmissions payment adjustment and the 

hospital VBP payment adjustment). 

Consequently, we are proposing to exclude 

the hospital VBP payment adjustments and 

the hospital readmissions payment 

adjustments from the calculation of the 

proposed outlier fixed-loss cost threshold. 

We note that, to the extent section 1886(r) 

of the Act modifies the DSH payment 

methodology under section 1886(d)(5)(F), the 

new uncompensated care payment under 

section 1886(r)(2), like the empirically 

justified Medicare DSH payment under 

section 1886(r)(1), may be considered an 

amount payable under section 1886(d)(5)(F) 

of the Act such that it would be reasonable 

to include the payment in the outlier 

determination under section 1886(d)(5)(A). 

As we did for FYs 2014 and 2015, we also 

are proposing for FY 2016 to allocate an 

estimated per-discharge uncompensated care 

payment amount to all cases for the hospitals 

eligible to receive the uncompensated care 

payment amount in the calculation of the 

outlier fixed-loss cost threshold 

methodology. We continue to believe that 

allocating an eligible hospital’s estimated 

uncompensated care payment to all cases 

equally in the calculation of the outlier fixedloss cost threshold would best approximate 

the amount we would pay in uncompensated 

care payments during the year because, when 

we make claim payments to a hospital 

eligible for such payments, we would be 

making estimated per-discharge 

uncompensated care payments to all cases 

equally. Furthermore, we continue to believe 

that using the estimated per-claim 

uncompensated care payment amount to 

determine outlier estimates provides 

predictability as to the amount of 

uncompensated care payments included in 

the calculation of outlier payments. 

Therefore, consistent with the methodology 

used in FYs 2014 and 2015 to calculate the 

outlier fixed-loss cost threshold, for FY 2016, 

we are proposing to include estimated FY 

2016 uncompensated care payments in the 

computation of the proposed outlier fixedloss cost threshold. Specifically, we are 

proposing to use the estimated per-discharge 

uncompensated care payments to hospitals 

eligible for the uncompensated care payment 

for all cases in the calculation of the 

proposed outlier fixed-loss cost threshold 

methodology. 

Using this methodology, we are proposing 

an outlier fixed-loss cost threshold for FY 

2016 equal to the prospective payment rate 

for the MS–DRG, plus any IME, empirically 

justified Medicare DSH payments, estimated 

uncompensated care payment, and any addon payments for new technology, plus 

$24,485. 

We note that the proposed FY 2016 fixedloss cost threshold is lower than the FY 2015 

final outlier fixed-loss cost threshold of 

$24,626. We believe that the decrease in the 

charge inflation factor (compared to the FY 

2015 charge inflation factor) contributed to a 

lower proposed outlier fixed-loss threshold 

for FY 2016. As charges decrease, so does the 

amount of outlier payments. As a result, it 

was necessary for us to lower the proposed 

outlier fixed-loss cost threshold to increase 

the amount of outlier payments expended in 

order to reach the 5.1 percent target. 

(2) Other Proposed Changes Concerning 

Outliers 

As stated in the FY 1994 IPPS final rule (58 

FR 46348), we establish an outlier threshold 

that is applicable to both hospital inpatient 

operating costs and hospital inpatient 

capital-related costs. When we modeled the 

combined operating and capital outlier 

payments, we found that using a common 

threshold resulted in a lower percentage of 

outlier payments for capital-related costs 

than for operating costs. We project that the 

thresholds for FY 2016 will result in outlier 

payments that will equal 5.1 percent of 


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operating DRG payments and 6.43 percent of 

capital payments based on the Federal rate. 

In accordance with section 1886(d)(3)(B) of 

the Act, we are proposing to reduce the FY 

2016 standardized amount by the same 

percentage to account for the projected 

proportion of payments paid as outliers. 

The proposed outlier adjustment factors 

that would be applied to the standardized 

amount based on the proposed FY 2016 

outlier threshold are as follows: 

Operating 

Standardized 

Amounts 

Capital 

Federal 

Rate 

National .................................................................................................................................................................... 0.948999 0.935731 

Puerto Rico .............................................................................................................................................................. 0.926818 0.925658 

We are proposing to apply the outlier 

adjustment factors to the proposed FY 2016 

payment rates after removing the effects of 

the FY 2015 outlier adjustment factors on the 

standardized amount. 

To determine whether a case qualifies for 

outlier payments, we apply hospital-specific 

CCRs to the total covered charges for the 

case. Estimated operating and capital costs 

for the case are calculated separately by 

applying separate operating and capital 

CCRs. These costs are then combined and 

compared with the outlier fixed-loss cost 

threshold. 

Under our current policy at § 412.84, we 

calculate operating and capital CCR ceilings 

and assign a statewide average CCR for 

hospitals whose CCRs exceed 3.0 standard 

deviations from the mean of the log 

distribution of CCRs for all hospitals. Based 

on this calculation, for hospitals for which 

the fiscal intermediary or MAC computes 

operating CCRs greater than 1.22 or capital 

CCRs greater than 0.173, or hospitals for 

which the fiscal intermediary or MAC is 

unable to calculate a CCR (as described under 

§ 412.84(i)(3) of our regulations), statewide 

average CCRs are used to determine whether 

a hospital qualifies for outlier payments. 

Table 8A listed in section VI. of this 

Addendum (and available only via the 

Internet on the CMS Web site) contains the 

proposed statewide average operating CCRs 

for urban hospitals and for rural hospitals for 

which the fiscal intermediary or MAC is 

unable to compute a hospital-specific CCR 

within the above range. Effective for 

discharges occurring on or after October 1, 

2015, these statewide average ratios would 

replace the ratios posted on our Web site at 

http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page-Items/FY2014-IPPS-Final-Rule-CMS-1599-FTables.html. Table 8B listed in section VI. of 

this Addendum (and available via the 

Internet on the CMS Web site) contains the 

comparable proposed statewide average 

capital CCRs. As previously stated, the 

proposed CCRs in Tables 8A and 8B would 

be used during FY 2016 when hospitalspecific CCRs based on the latest settled cost 

report either are not available or are outside 

the range noted above. Table 8C listed in 

section VI. of this Addendum (and available 

via the Internet on the CMS Web site) 

contains the proposed statewide average total 

CCRs used under the LTCH PPS as discussed 

in section V. of this Addendum. 

We finally note that we published a 

manual update (Change Request 3966) to our 

outlier policy on October 12, 2005, which 

updated Chapter 3, Section 20.1.2 of the 

Medicare Claims Processing Manual. The 

manual update covered an array of topics, 

including CCRs, reconciliation, and the time 

value of money. We encourage hospitals that 

are assigned the statewide average operating 

and/or capital CCRs to work with their fiscal 

intermediary or MAC on a possible 

alternative operating and/or capital CCR as 

explained in Change Request 3966. Use of an 

alternative CCR developed by the hospital in 

conjunction with the fiscal intermediary or 

MAC can avoid possible overpayments or 

underpayments at cost report settlement, 

thereby ensuring better accuracy when 

making outlier payments and negating the 

need for outlier reconciliation. We also note 

that a hospital may request an alternative 

operating or capital CCR ratio at any time as 

long as the guidelines of Change Request 

3966 are followed. In addition, as mentioned 

above, we published an additional manual 

update (Change Request 7192) to our outlier 

policy on December 3, 2010, which also 

updated Chapter 3, Section 20.1.2 of the 

Medicare Claims Processing Manual. The 

manual update outlines the outlier 

reconciliation process for hospitals and 

Medicare contractors. To download and view 

the manual instructions on outlier 

reconciliation, we refer readers to the CMS 

Web site: http://www.cms.hhs.gov/manuals/

downloads/clm104c03.pdf. 

(3) FY 2014 and FY 2015 Outlier Payments 

In the FY 2015 IPPS/LTCH PPS final rule 

correction notice (79 FR 59681), we stated 

that, based on available data, we estimated 

that actual FY 2014 outlier payments would 

be approximately 5.68 percent of actual total 

MS–DRG payments. This estimate was 

computed based on simulations using the FY 

2013 MedPAR file (discharge data for FY 

2013 claims). That is, the estimate of actual 

outlier payments did not reflect actual FY 

2014 claims, but instead reflected the 

application of FY 2014 payment rates and 

policies to available FY 2013 claims. 

Our current estimate, using available FY 

2014 claims data, is that actual outlier 

payments for FY 2014 were approximately 

5.34 percent of actual total MS–DRG 

payments. Therefore, the data indicate that, 

for FY 2014, the percentage of actual outlier 

payments relative to actual total payments is 

higher than we projected for FY 2014. 

Consistent with the policy and statutory 

interpretation we have maintained since the 

inception of the IPPS, we do not make 

retroactive adjustments to outlier payments 

to ensure that total outlier payments for FY 

2014 are equal to 5.1 percent of total MS– 

DRG payments. 

We currently estimate that, using the latest 

CCRs from the December 2014 update of the 

PSF, actual outlier payments for FY 2015 will 

be approximately 4.88 percent of actual total 

MS–DRG payments, approximately 0.22 

percentage point lower than the 5.1 percent 

we projected when setting the outlier policies 

for FY 2015. This estimate of 4.88 percent is 

based on simulations using the FY 2014 

MedPAR file (discharge data for FY 2014 

claims). 

5. Proposed FY 2016 Standardized Amount 

The adjusted standardized amount is 

divided into labor-related and nonlaborrelated portions. Tables 1A and 1B listed and 

published in section VI. of this Addendum 

(and available via the Internet) contain the 

national standardized amounts that we are 

proposing to apply to all hospitals, except 

hospitals located in Puerto Rico, for FY 2016. 

The proposed Puerto Rico-specific amounts 

are shown in Table 1C listed and published 

in section VI. of this Addendum (and 

available via the Internet on the CMS Web 

site). The proposed amounts shown in Tables 

1A and 1B differ only in that the laborrelated share applied to the standardized 

amounts in Table 1A is 69.6 percent, and the 

labor-related share applied to the 

standardized amounts in Table 1B is 62 

percent. In accordance with sections 

1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, 

we are proposing to apply a labor-related 

share of 62 percent, unless application of that 

percentage would result in lower payments 

to a hospital than would otherwise be made. 

In effect, the statutory provision means that 

we will apply a labor-related share of 62 

percent for all hospitals whose wage indexes 

are less than or equal to 1.0000. 

In addition, Tables 1A and 1B include the 

proposed standardized amounts reflecting 

the proposed applicable percentage increases 

for FY 2016. 

Under section 1886(d)(9)(A)(ii) of the Act, 

the Federal portion of the Puerto Rico 

payment rate is based on the dischargeweighted average of the national large urban 

standardized amount (this amount is set forth 

in Table 1A). The proposed labor-related and 

nonlabor-related portions of the national 

average standardized amounts for Puerto 

Rico hospitals for FY 2016 are set forth in 

Table 1C listed and published in section VI. 

of this Addendum (and available via the 

Internet on the CMS Web site). This table 

also includes the proposed Puerto Ricospecific standardized amounts. The laborrelated share applied to the proposed Puerto 

Rico-specific standardized amount is the 

proposed labor-related share of 63.2 percent, 

or 62 percent, depending on which provides 

higher payments to the hospital. (Section 

1886(d)(9)(C)(iv) of the Act, as amended by 


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section 403(b) of Public Law 108–173, 

provides that the labor-related share for 

hospitals located in Puerto Rico be 62 

percent, unless the application of that 

percentage would result in lower payments 

to the hospital.) 

The following table illustrates the changes 

from the FY 2015 national standardized 

amount to the proposed FY 2016 national 

standardized amount. The second through 

fifth columns display the proposed changes 

from the FY 2015 standardized amounts for 

each applicable FY 2016 standardized 

amount. The first row of the table shows the 

updated (through FY 2015) average 

standardized amount after restoring the FY 

2015 offsets for outlier payments, 

demonstration budget neutrality, geographic 

reclassification budget neutrality, new labor 

market delineation wage Index transition 

budget neutrality and the retrospective 

documentation and coding adjustment under 

section 7(b)(1)(B) of Public Law 110–90. The 

MS–DRG reclassification and recalibration 

and wage index budget neutrality adjustment 

factors are cumulative. Therefore, those FY 

2015 adjustment factors are not removed 

from this table. 

COMPARISON OF FY 2015 STANDARDIZED AMOUNTS TO THE PROPOSED FY 2016 STANDARDIZED AMOUNTS

Hospital submitted quality 

data and is a meaningful 

EHR user 

Hospital submitted quality 

data and is NOT a meaningful EHR user 

Hospital did NOT submit 

quality data and is a 

meaningful EHR user 

Hospital did NOT submit 

quality data and is NOT a 

meaningful EHR user 

FY 2015 Base Rate after removing: ...........................

1. FY 2015 Geographic Reclassification Budget Neutrality (0.990429).

2. FY 2015 Rural Community Hospital Demonstration Program Budget Neutrality (0.999313).

3. Cumulative FY 2008, FY 2009, FY 2012, FY 2013 

and FY 2014, FY 2015 Documentation and Coding Adjustment as Required under Sections 

7(b)(1)(A) and 7(b)(1)(B) of Public Law 110–90 

and Documentation and Coding Recoupment Adjustment as required under Section 631 of the 

American Taxpayer Relief Act of 2012 (0.9329).

If Wage Index is Greater 

Than 1.0000: Labor 

(69.6%): $4,324.23; 

Nonlabor (30.4%): 

$1,888.74.

If Wage Index is Greater 

Than 1.0000: Labor 

(69.6%): $4,324.23; 

Nonlabor (30.4%): 

$1,888.74.

If Wage Index is Greater 

Than 1.0000: Labor 

(69.6%): $4,324.23; 

Nonlabor (30.4%): 

$1,888.74.

If Wage Index is Greater 

Than 1.0000: Labor 

(69.6%): $4,324.23; 

Nonlabor (30.4%): 

$1,888.74. 

4. FY 2015 Operating Outlier Offset (0.948999) ........

5. FY 2015 New Labor Market Delineation Wage 

Index Transition Budget Neutrality Factor 

(0.998854).

If Wage Index is less 

Than or Equal to 

1.0000: Labor (62%): 

$3,852.04; Nonlabor 

(38%): $2,360.93.

If Wage Index is less 

Than or Equal to 

1.0000: Labor (62%): 

$3,852.04; Nonlabor 

(38%): $2,360.93.

If Wage Index is less 

Than or Equal to 

1.0000: Labor (62%): 

$3,852.04; Nonlabor 

(38%): $2,360.93.

If Wage Index is less 

Than or Equal to 

1.0000: Labor (62%): 

$3,852.04; Nonlabor 

(38%): $2,360.93. 

Proposed FY 2016 Update Factor ............................. 1.019 ............................... 1.0055 ............................. 1.01225 ........................... 0.99875. 

Proposed FY 2016 MS-DRG Recalibration and 

Wage Index Budget Neutrality Factor.

0.997018 ......................... 0.997018 ......................... 0.997018 ......................... 0.997018. 

Proposed FY 2016 Reclassification Budget Neutrality 

Factor.

0.988486 ......................... 0.988486 ......................... 0.988486 ......................... 0.988486. 

Proposed FY 2016 Rural Community Demonstration 

Program Budget Neutrality Factor.

0.999808 ......................... 0.999808 ......................... 0.999808 ......................... 0.999808. 

Proposed FY 2016 Operating Outlier Factor ............. 0.948999 ......................... 0.948999 ......................... 0.948999 ......................... 0.98999. 

Cumulative Factor: FY 2008, FY 2009, FY 2012, FY 

2013, FY 2014, FY 2015 and FY 2016 Documentation and Coding Adjustment as Required 

under Sections 7(b)(1)(A) and 7(b)(1)(B) of Public 

Law 110–90 and Documentation and Coding 

Recoupment Adjustment as required under Section 631 of the American Taxpayer Relief Act of 

2012.

0.9255 ............................. 0.9255 ............................. 0.9255 ............................. 0.9255. 

Proposed FY 2016 New Labor Market Delineation 

Wage Index Three Year Hold Harmless Transition 

Budget Neutrality Factor.

0.999995 ......................... 0.999995 ......................... 0.999995 ......................... 0.999995. 

Proposed National Standardized Amount for FY 

2016 if Wage Index is Greater Than 1.0000; 

Labor/Non-Labor Share Percentage (69.6/30.4).

Labor: $3,813.40; 

Nonlabor: $1,665.63.

Labor: $3,762.88; 

Nonlabor: $1,643.56.

Labor: $3,788.14; 

Nonlabor: $1,654.60.

Labor: $3,737.62; 

Nonlabor: $1,632.53. 

Proposed National Standardized Amount for FY 

2016 if Wage Index is less Than or Equal to 

1.0000; Labor/Non-Labor Share Percentage (62/

38).

Labor: $3,397.00; 

Nonlabor: $2,082.03.

Labor: $3,351.99; 

Nonlabor: $2,054.45.

Labor: $3,374.50; 

Nonlabor: $2,068.24.

Labor: $3,329.49; 

Nonlabor: $2,040.66. 

The following table illustrates the 

proposed changes from the FY 2015 Puerto 

Rico-specific payment rate for hospitals 

located in Puerto Rico. The second column 

shows the proposed changes from the FY 

2015 Puerto Rico specific payment rate for 

hospitals with a Puerto Rico-specific wage 

index greater than 1.0000. The third column 

shows the proposed changes from the FY 

2015 Puerto Rico specific payment rate for 

hospitals with a Puerto Rico-specific wage 

index less than or equal to 1.0000. The first 

row of the table shows the updated (through 

FY 2015) Puerto Rico-specific payment rate 

after restoring the FY 2015 offsets for Puerto 

Rico-specific outlier payments, rural 

community hospital demonstration program 

budget neutrality, and the geographic 

reclassification budget neutrality. The MS– 

DRG recalibration budget neutrality 

adjustment factor is cumulative and is not 

removed from this table. 

COMPARISON OF FY 2015 PUERTO RICO-SPECIFIC PAYMENT RATE TO THE PROPOSED FY 2016 PUERTO RICO-SPECIFIC

PAYMENT RATE

Proposed update (1.9 percent); 

wage index is greater than 1.0000; 

labor/non-labor share percentage 

(63.2/36.8) 

Proposed update (1.9 percent); 

wage index is less than or equal 

to 1.0000; labor/non-labor share 

percentage (62/38) 

FY 2015 Puerto Rico Base Rate, after removing: ..................................

1. FY 2015 Geographic Reclassification Budget Neutrality (0.990429)

Labor: $1,758.02; Nonlabor: 

$1,023.66.

Labor: $1,724.64; Nonlabor: 

$1,057.04. 


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COMPARISON OF FY 2015 PUERTO RICO-SPECIFIC PAYMENT RATE TO THE PROPOSED FY 2016 PUERTO RICO-SPECIFIC

PAYMENT RATE—Continued 

Proposed update (1.9 percent); 

wage index is greater than 1.0000; 

labor/non-labor share percentage 

(63.2/36.8) 

Proposed update (1.9 percent); 

wage index is less than or equal 

to 1.0000; labor/non-labor share 

percentage (62/38) 

2. FY 2015 Rural Community Hospital Demonstration Program Budget 

Neutrality (0.999313). 

3. FY 2015 Puerto Rico Operating Outlier Offset (0.926334). 

4. FY 2015 New Labor Market Delineation Wage Index Transition 

Budget Neutrality Factor (0.998854). 

Proposed FY 2016 Update Factor .......................................................... 1.019 .............................................. 1.019. 

Proposed FY 2016 MS-DRG Recalibration Budget Neutrality Factor .... 0.998335 ........................................ 0.998335. 

Proposed FY 2016 Reclassification Budget Neutrality Factor ................ 0.988486 ........................................ 0.988486. 

Proposed FY 2016 Rural Community Hospital Demonstration Program 

Budget Neutrality Factor.

0.999808 ........................................ 0.999808. 

Proposed FY 2016 New Labor Market Delineation Wage Index Three 

Year Hold Harmless Transition Budget Neutrality Factor.

0.999995 ........................................ 0.999995. 

Proposed FY 2016 Puerto Rico Operating Outlier Factor ...................... 0.926818 ........................................ 0.926818. 

Proposed Puerto Rico-Specific Payment Rate for FY 2016 ................... Labor: $1,638.15; Nonlabor: 

$953.86.

Labor: $1,607.05; Nonlabor: 

$984.96. 

B. Proposed Adjustments for Area Wage 

Levels and Cost-of-Living 

Tables 1A through 1C, as published in 

section VI. of this Addendum (and available 

via the Internet), contain the proposed laborrelated and nonlabor-related shares that we 

are proposing to use to calculate the 

prospective payment rates for hospitals 

located in the 50 States, the District of 

Columbia, and Puerto Rico for FY 2016. This 

section addresses two types of adjustments to 

the standardized amounts that are made in 

determining the proposed prospective 

payment rates as described in this 

Addendum. 

1. Proposed Adjustment for Area Wage 

Levels 

Sections 1886(d)(3)(E) and 

1886(d)(9)(C)(iv) of the Act require that we 

make an adjustment to the labor-related 

portion of the national and Puerto Rico 

prospective payment rates, respectively, to 

account for area differences in hospital wage 

levels. This adjustment is made by 

multiplying the labor-related portion of the 

adjusted standardized amounts by the 

appropriate wage index for the area in which 

the hospital is located. In section III. of the 

preamble of this proposed rule, we discuss 

the data and methodology for the proposed 

FY 2016 wage index. 

2. Adjustment for Cost-of-Living in Alaska 

and Hawaii 

Section 1886(d)(5)(H) of the Act provides 

discretionary authority to the Secretary to 

make such adjustments as the Secretary 

deems appropriate to take into account the 

unique circumstances of hospitals located in 

Alaska and Hawaii. Higher labor-related costs 

for these two States are taken into account in 

the adjustment for area wages described 

above. To account for higher nonlabor-related 

costs for these two States, we multiply the 

nonlabor-related portion of the standardized 

amount for hospitals located in Alaska and 

Hawaii by an adjustment factor. 

In the FY 2013 IPPS/LTCH PPS final rule, 

we established a methodology to update the 

COLA factors for Alaska and Hawaii that 

were published by the U.S. Office of 

Personnel Management (OPM) every 4 years 

(at the same time as the update to the laborrelated share of the IPPS market basket), 

beginning in FY 2014. We refer readers to the 

FY 2013 IPPS/LTCH PPS proposed and final 

rules for additional background and a 

detailed description of this methodology (77 

FR 28145 through 28146 and 77 FR 53700 

through 53701, respectively). 

For FY 2014, in the FY 2014 IPPS/LTCH 

PPS final rule (78 FR 50985 through 50987), 

we updated the COLA factors published by 

OPM for 2009 (as these are the last COLA 

factors OPM published prior to transitioning 

from COLAs to locality pay) using the 

methodology that we finalized in the FY 

2013 IPPS/LTCH PPS final rule. 

Based on the policy finalized in the FY 

2013 IPPS/LTCH PPS final rule, we are 

proposing to continue to use the same COLA 

factors in FY 2016 that were used in FY 2015 

to adjust the nonlabor-related portion of the 

standardized amount for hospitals located in 

Alaska and Hawaii. Below is a table listing 

the proposed COLA factors for FY 2016. 

PROPOSED FY 2016 COST-OF-LIVING

ADJUSTMENT FACTORS: ALASKA AND

HAWAII HOSPITALS

Area 

Cost of 

living 

adjustment 

factor 

Alaska: 

City of Anchorage and 80- 

kilometer (50-mile) radius by road ................... 1.23 

City of Fairbanks and 80- 

kilometer (50-mile) radius by road ................... 1.23 

City of Juneau and 80-kilometer (50-mile) radius by 

road ................................ 1.23 

Rest of Alaska ................... 1.25 

Hawaii: 

City and County of Honolulu ................................. 1.25 

PROPOSED FY 2016 COST-OF-LIVING

ADJUSTMENT FACTORS: ALASKA AND

HAWAII HOSPITALS—Continued 

Area 

Cost of 

living 

adjustment 

factor 

County of Hawaii ............... 1.19 

County of Kauai ................. 1.25 

County of Maui and County of Kalawao ................. 1.25 

Based on the policy finalized in the FY 

2013 IPPS/LTCH PPS final rule, the next 

update to the COLA factors for Alaska and 

Hawaii would occur in FY 2018. 

C. Calculation of the Proposed Prospective 

Payment Rates 

General Formula for Calculation of the 

Prospective Payment Rates for FY 2016 

In general, the operating prospective 

payment rate for all hospitals paid under the 

IPPS located outside of Puerto Rico, except 

SCHs, for FY 2016 equals the Federal rate 

(which includes uncompensated care 

payments). We note that the MDH program 

expired for discharges beginning on April 1, 

2015 under current law. 

SCHs are paid based on whichever of the 

following rates yields the greatest aggregate 

payment: The Federal national rate (which, 

as discussed in section IV.D. of the preamble 

of this proposed rule, includes 

uncompensated care payments); the updated 

hospital-specific rate based on FY 1982 costs 

per discharge; the updated hospital-specific 

rate based on FY 1987 costs per discharge; 

the updated hospital-specific rate based on 

FY 1996 costs per discharge; or the updated 

hospital-specific rate based on FY 2006 costs 

per discharge to determine the rate that 

yields the greatest aggregate payment. 

The prospective payment rate for SCHs for 

FY 2016 equals the higher of the applicable 

Federal rate, or the hospital-specific rate as 

described below. 


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The prospective payment rate for hospitals 

located in Puerto Rico for FY 2016 equals 25 

percent of the Puerto Rico-specific payment 

rate plus 75 percent of the applicable 

national rate. 

1. Federal Rate 

The Federal rate is determined as follows: 

Step 1—Select the applicable average 

standardized amount depending on whether 

the hospital submitted qualifying quality data 

and is a meaningful EHR user, as described 

above. 

Step 2—Multiply the labor-related portion 

of the standardized amount by the applicable 

wage index for the geographic area in which 

the hospital is located or the area to which 

the hospital is reclassified. 

Step 3—For hospitals located in Alaska 

and Hawaii, multiply the nonlabor-related 

portion of the standardized amount by the 

applicable cost-of-living adjustment factor. 

Step 4—Add the amount from Step 2 and 

the nonlabor-related portion of the 

standardized amount (adjusted, if applicable, 

under Step 3). 

Step 5—Multiply the final amount from 

Step 4 by the relative weight corresponding 

to the applicable MS–DRG (Table 5 listed in 

section VI. of this Addendum and available 

via the Internet). 

The Federal payment rate as determined in 

Step 5 may then be further adjusted if the 

hospital qualifies for either the IME or DSH 

adjustment. In addition, for hospitals that 

qualify for a low-volume payment adjustment 

under section 1886(d)(12) of the Act and 42 

CFR 412.101(b), the payment in Step 5 would 

be increased by a specified formula. The 

base-operating DRG payment amount may be 

further adjusted by the hospital readmissions 

payment adjustment and the hospital VBP 

payment adjustment as described under 

sections 1886(q) and 1886(o) of the Act, 

respectively. Finally, we add the 

uncompensated care payment to the total 

claim payment amount. We note that, as 

discussed above, we take uncompensated 

care payments into consideration when 

calculating outlier payments. 

2. Hospital-Specific Rate (Applicable Only to 

SCHs) 

a. Calculation of Hospital-Specific Rate 

Section 1886(b)(3)(C) of the Act provides 

that SCHs are paid based on whichever of the 

following rates yields the greatest aggregate 

payment: The Federal rate (which, as 

discussed in section IV.D. of the preamble of 

this proposed rule, includes uncompensated 

care payments); the updated hospital-specific 

rate based on FY 1982 costs per discharge; 

the updated hospital-specific rate based on 

FY 1987 costs per discharge; the updated 

hospital-specific rate based on FY 1996 costs 

per discharge; or the updated hospitalspecific rate based on FY 2006 costs per 

discharge to determine the rate that yields 

the greatest aggregate payment. 

For a more detailed discussion of the 

calculation of the hospital-specific rates, we 

refer readers to the FY 1984 IPPS interim 

final rule (48 FR 39772); the April 20, 1990 

final rule with comment period (55 FR 

15150); the FY 1991 IPPS final rule (55 FR 

35994); and the FY 2001 IPPS final rule (65 

FR 47082). We also refer readers to section 

IV.D. of the preamble of this proposed rule 

for a complete discussion on empirically 

justified Medicare DSH and uncompensated 

care payments. 

b. Updating the FY 1982, FY 1987, FY 1996 

and FY 2006 Hospital-Specific Rate for FY 

2016 

Section 1886(b)(3)(B)(iv) of the Act 

provides that the applicable percentage 

increase applicable to the hospital-specific 

rates for SCHs equals the applicable 

percentage increase set forth in section 

1886(b)(3)(B)(i) of the Act (that is, the same 

update factor as for all other hospitals subject 

to the IPPS). Because the Act sets the update 

factor for SCHs equal to the update factor for 

all other IPPS hospitals, the update to the 

hospital-specific rates for SCHs is subject to 

the amendments to section 1886(b)(3)(B) of 

the Act made by sections 3401(a) and 

10319(a) of the Affordable Care Act. 

Accordingly, the proposed applicable 

percentage increases to the hospital-specific 

rates applicable to SCHs are the following: 

FY 2016 

Hospital 

submitted 

quality data 

and is a 

meaningful 

EHR user 

Hospital 

submitted 

quality data 

and is NOT a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is NOT a 

meaningful 

EHR user 

Proposed Market Basket Rate-of-Increase ..................................................... 2.7 2.7 2.7 2.7 

Proposed Adjustment for Failure to Submit Quality Data under Section 

1886(b)(3)(B)(viii) of the Act ........................................................................ 0.0 0.0 ¥0.675 ¥0.675 

Proposed Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ................................................................... 0.0 ¥1.35 0.0 ¥1.35 

Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......... ¥0.6 ¥0.6 ¥0.6 ¥0.6 

Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... ¥0.2 ¥0.2 ¥0.2 ¥0.2 

Proposed Applicable Percentage Increase Applied to Hospital Specific Rate 1.9 0.55 1.225 ¥0.125 

For a complete discussion of the applicable 

percentage increase applied to the hospitalspecific rates for SCHs, we refer readers to 

section IV.A. of the preamble of this 

proposed rule. 

In addition, because SCHs use the same 

MS–DRGs as other hospitals when they are 

paid based in whole or in part on the 

hospital-specific rate, the hospital-specific 

rate is adjusted by a budget neutrality factor 

to ensure that changes to the MS–DRG 

classifications and the recalibration of the 

MS–DRG relative weights are made in a 

manner so that aggregate IPPS payments are 

unaffected. Therefore, a SCH’s hospitalspecific rate is adjusted by the proposed MS– 

DRG reclassification and recalibration budget 

neutrality factor of 0.998335, as discussed in 

section III. of this Addendum. The resulting 

rate is used in determining the proposed 

payment rate that an SCH would receive for 

its discharges beginning on or after October 

1, 2015. We note that, in this proposed rule, 

for FY 2016, we are not proposing to make 

a documentation and coding adjustment to 

the hospital-specific rate. We refer readers to 

section II.D. of the preamble of this proposed 

rule for a complete discussion regarding our 

proposed policies and previously finalized 

policies (including our historical adjustments 

to the payment rates) relating to the effect of 

changes in documentation and coding that do 

not reflect real changes in case-mix. 

3. General Formula for Calculation of 

Prospective Payment Rates for Hospitals 

Located in Puerto Rico Beginning on or After 

October 1, 2015, and Before October 1, 2016 

Section 1886(d)(9)(E)(iv) of the Act 

provides that, effective for discharges 

occurring on or after October 1, 2004, 

hospitals located in Puerto Rico are paid 

based on a blend of 75 percent of the national 

prospective payment rate and 25 percent of 

the Puerto Rico-specific rate. 

a. Puerto Rico-Specific Rate 

The Puerto Rico-specific prospective 

payment rate is determined as follows: 

Step 1—Select the applicable average 

standardized amount considering the 

applicable wage index (obtained from Table 

1C published in section VI. of this 

Addendum and available via the Internet). 

Step 2—Multiply the labor-related portion 

of the standardized amount by the applicable 

Puerto Rico-specific wage index. 

Step 3—Add the amount from Step 2 and 

the nonlabor-related portion of the 

standardized amount. 

Step 4—Multiply the amount from Step 3 

by the applicable MS–DRG relative weight 

(obtained from Table 5 listed in section VI. 

of this Addendum and available via the 

Internet). 

Step 5—Multiply the result in Step 4 by 25 

percent. 


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b. National Prospective Payment Rate 

The national prospective payment rate is 

determined as follows: 

Step 1—Select the applicable national 

average standardized amount. 

Step 2—Multiply the labor-related portion 

of the national average standardized amount 

by the applicable wage index for the 

geographic area in which the hospital is 

located or the area to which the hospital is 

reclassified. 

Step 3—Add the amount from Step 2 and 

the nonlabor-related portion of the national 

average standardized amount. 

Step 4—Multiply the amount from Step 3 

by the applicable MS–DRG relative weight 

(obtained from Table 5 listed in section VI. 

of this Addendum and available via the 

Internet on the CMS Web site). 

Step 5—Multiply the result in Step 4 by 75 

percent. 

The sum of the Puerto Rico-specific rate 

and the national prospective payment rate 

computed above equals the prospective 

payment rate for a given discharge for a 

hospital located in Puerto Rico. This 

payment rate is then further adjusted if the 

hospital qualifies for either the IME or DSH 

adjustment. 

Finally, we add the uncompensated care 

payment to the total claim payment amount. 

We note that, as discussed above, we take 

uncompensated care payments into 

consideration when calculating outlier 

payments. 

III. Proposed Changes to Payment Rates for 

Acute Care Hospital Inpatient CapitalRelated Costs for FY 2016 

The PPS for acute care hospital inpatient 

capital-related costs was implemented for 

cost reporting periods beginning on or after 

October 1, 1991. Effective with that cost 

reporting period, over a 10-year transition 

period (which extended through FY 2001) 

the payment methodology for Medicare acute 

care hospital inpatient capital-related costs 

changed from a reasonable cost-based 

methodology to a prospective methodology 

(based fully on the Federal rate). 

The basic methodology for determining 

Federal capital prospective rates is set forth 

in the regulations at 42 CFR 412.308 through 

412.352. Below we discuss the factors that 

we used to determine the proposed capital 

Federal rate for FY 2016, which would be 

effective for discharges occurring on or after 

October 1, 2015. 

The 10-year transition period ended with 

hospital cost reporting periods beginning on 

or after October 1, 2001 (FY 2002). Therefore, 

for cost reporting periods beginning in FY 

2002, all hospitals (except ‘‘new’’ hospitals 

under § 412.304(c)(2)) are paid based on the 

capital Federal rate. For FY 1992, we 

computed the standard Federal payment rate 

for capital-related costs under the IPPS by 

updating the FY 1989 Medicare inpatient 

capital cost per case by an actuarial estimate 

of the increase in Medicare inpatient capital 

costs per case. Each year after FY 1992, we 

update the capital standard Federal rate, as 

provided at § 412.308(c)(1), to account for 

capital input price increases and other 

factors. The regulations at § 412.308(c)(2) also 

provide that the capital Federal rate be 

adjusted annually by a factor equal to the 

estimated proportion of outlier payments 

under the capital Federal rate to total capital 

payments under the capital Federal rate. In 

addition, § 412.308(c)(3) requires that the 

capital Federal rate be reduced by an 

adjustment factor equal to the estimated 

proportion of payments for exceptions under 

§ 412.348. (We note that, as discussed in the 

FY 2013 IPPS/LTCH PPS final rule (77 FR 

53705), there is generally no longer a need for 

an exceptions payment adjustment factor.) 

However, in limited circumstances, an 

additional payment exception for 

extraordinary circumstances is provided for 

under § 412.348(f) for qualifying hospitals. 

Therefore, in accordance with 

§ 412.308(c)(3), an exceptions payment 

adjustment factor may need to be applied if 

such payments are made. Section 

412.308(c)(4)(ii) requires that the capital 

standard Federal rate be adjusted so that the 

effects of the annual DRG reclassification and 

the recalibration of DRG weights and changes 

in the geographic adjustment factor (GAF) are 

budget neutral. 

Section 412.374 provides for blended 

payments to hospitals located in Puerto Rico 

under the IPPS for acute care hospital 

inpatient capital-related costs. Accordingly, 

under the capital PPS, we compute a separate 

payment rate specific to hospitals located in 

Puerto Rico using the same methodology 

used to compute the national Federal rate for 

capital-related costs. In accordance with 

section 1886(d)(9)(A) of the Act, under the 

IPPS for acute care hospital operating costs, 

hospitals located in Puerto Rico are paid for 

operating costs under a special payment 

formula. Effective October 1, 2004, in 

accordance with section 504 of Public Law 

108–173, the methodology for operating 

payments made to hospitals located in Puerto 

Rico under the IPPS was revised to make 

payments based on a blend of 25 percent of 

the applicable standardized amount specific 

to Puerto Rico hospitals and 75 percent of the 

applicable national average standardized 

amount. In conjunction with this change to 

the operating blend percentage, effective with 

discharges occurring on or after October 1, 

2004, we also revised the methodology for 

computing capital payments made to 

hospitals located in Puerto Rico to be based 

on a blend of 25 percent of the Puerto Rico 

capital rate and 75 percent of the national 

capital Federal rate (69 FR 49185). 

A. Determination of the Proposed Federal 

Hospital Inpatient Capital-Related 

Prospective Payment Rate Update 

In the discussion that follows, we explain 

the factors that we used to determine the 

proposed capital Federal rate for FY 2016. In 

particular, we explain why the proposed FY 

2016 capital Federal rate increases 

approximately 0.8 percent, compared to the 

FY 2015 capital Federal rate. As discussed in 

the impact analysis in Appendix A to this 

proposed rule, we estimate that capital 

payments per discharge would increase 

approximately 2.0 percent during that same 

period. Because capital payments constitute 

about 10 percent of hospital payments, a 

percent change in the capital Federal rate 

yields only about a 0.1 percent change in 

actual payments to hospitals. 

1. Projected Capital Standard Federal Rate 

Update 

a. Description of the Update Framework 

Under § 412.308(c)(1), the capital standard 

Federal rate is updated on the basis of an 

analytical framework that takes into account 

changes in a capital input price index (CIPI) 

and several other policy adjustment factors. 

Specifically, we adjust the projected CIPI 

rate-of-increase as appropriate each year for 

case-mix index-related changes, for intensity, 

and for errors in previous CIPI forecasts. The 

proposed update factor for FY 2016 under 

that framework is 1.3 percent based on the 

best data available at this time. The proposed 

update factor under that framework is based 

on a projected 1.3 percent increase in the FY 

2010-based CIPI, a 0.0 percentage point 

adjustment for intensity, a 0.0 percentage 

point adjustment for case-mix, a 0.0 

percentage point adjustment for the DRG 

reclassification and recalibration, and a 

forecast error correction of 0.0 percentage 

point. As discussed below in section III.C. of 

this Addendum, we continue to believe that 

the CIPI is the most appropriate input price 

index for capital costs to measure capital 

price changes in a given year. We also 

explain the basis for the FY 2016 CIPI 

projection in that same section of this 

Addendum. Below we describe the policy 

adjustments that we are proposing to apply 

in the update framework for FY 2016. 

The case-mix index is the measure of the 

average DRG weight for cases paid under the 

IPPS. Because the DRG weight determines 

the prospective payment for each case, any 

percentage increase in the case-mix index 

corresponds to an equal percentage increase 

in hospital payments. 

The case-mix index can change for any of 

several reasons: 

• The average resource use of Medicare 

patients changes (‘‘real’’ case-mix change); 

• Changes in hospital documentation and 

coding of patient records result in higherweighted DRG assignments (‘‘coding 

effects’’); and 

• The annual DRG reclassification and 

recalibration changes may not be budget 

neutral (‘‘reclassification effect’’). 

We define real case-mix change as actual 

changes in the mix (and resource 

requirements) of Medicare patients as 

opposed to changes in documentation and 

coding behavior that result in assignment of 

cases to higher-weighted DRGs, but do not 

reflect higher resource requirements. The 

capital update framework includes the same 

case-mix index adjustment used in the 

former operating IPPS update framework (as 

discussed in the May 18, 2004 IPPS proposed 

rule for FY 2005 (69 FR 28816)). (We no 

longer use an update framework to make a 

recommendation for updating the operating 

IPPS standardized amounts as discussed in 

section II. of Appendix B to the FY 2006 IPPS 

final rule (70 FR 47707).) 

For FY 2016, we are projecting a 0.5 

percent total increase in the case-mix index. 

We estimated that the real case-mix increase 

will also equal 0.5 percent for FY 2016. The 

proposed net adjustment for change in casemix is the difference between the projected 

real increase in case-mix and the projected 


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total increase in case-mix. Therefore, the 

proposed net adjustment for case-mix change 

in FY 2016 is 0.0 percentage point. 

The capital update framework also 

contains an adjustment for the effects of DRG 

reclassification and recalibration. This 

adjustment is intended to remove the effect 

on total payments of prior year’s changes to 

the DRG classifications and relative weights, 

in order to retain budget neutrality for all 

case-mix index-related changes other than 

those due to patient severity of illness. Due 

to the lag time in the availability of data, 

there is a 2-year lag in data used to determine 

the adjustment for the effects of DRG 

reclassification and recalibration. For 

example, we have data available to evaluate 

the effects of the FY 2014 DRG 

reclassification and recalibration as part of 

our update for FY 2016. We estimate that FY 

2014 DRG reclassification and recalibration 

resulted in no change in the case-mix when 

compared with the case-mix index that 

would have resulted if we had not made the 

reclassification and recalibration changes to 

the DRGs. Therefore, we are proposing to 

make a 0.0 percentage point adjustment for 

reclassification and recalibration in the 

update framework for FY 2016. 

The capital update framework also 

contains an adjustment for forecast error. The 

input price index forecast is based on 

historical trends and relationships 

ascertainable at the time the update factor is 

established for the upcoming year. In any 

given year, there may be unanticipated price 

fluctuations that may result in differences 

between the actual increase in prices and the 

forecast used in calculating the update 

factors. In setting a prospective payment rate 

under the framework, we make an 

adjustment for forecast error only if our 

estimate of the change in the capital input 

price index for any year is off by 0.25 

percentage point or more. There is a 2-year 

lag between the forecast and the availability 

of data to develop a measurement of the 

forecast error. A forecast error of 0.0 

percentage point is calculated for the 

proposed FY 2016 update. Historically, when 

a forecast error of the CIPI is greater than 0.25 

percentage point in absolute terms, it is 

reflected in the update recommended under 

this framework. A forecast error of 0.0 

percentage point was calculated for the FY 

2014 update. That is, current historical data 

indicate that the forecasted FY 2014 CIPI (1.2 

percent) used in calculating the FY 2014 

update factor was equal to the actual realized 

price increases (also 1.2 percent). Therefore, 

we are not proposing to make an adjustment 

for a forecast error in the update for FY 2016. 

Under the capital IPPS update framework, 

we also make an adjustment for changes in 

intensity. Historically, we calculated this 

adjustment using the same methodology and 

data that were used in the past under the 

framework for operating IPPS. The intensity 

factor for the operating update framework 

reflected how hospital services are utilized to 

produce the final product, that is, the 

discharge. This component accounts for 

changes in the use of quality-enhancing 

services, for changes within DRG severity, 

and for expected modification of practice 

patterns to remove noncost-effective services. 

Our intensity measure is based on a 5-year 

average. 

We calculate case-mix constant intensity as 

the change in total cost per discharge, 

adjusted for price level changes (the CIPI for 

hospital and related services) and changes in 

real case-mix. Without reliable estimates of 

the proportions of the overall annual 

intensity increases that are due, respectively, 

to ineffective practice patterns and the 

combination of quality-enhancing new 

technologies and complexity within the DRG 

system, we assume that one-half of the 

annual increase is due to each of these 

factors. The capital update framework thus 

provides an add-on to the input price index 

rate of increase of one-half of the estimated 

annual increase in intensity, to allow for 

increases within DRG severity and the 

adoption of quality-enhancing technology. 

In this proposed rule, we are proposing to 

continue to use a Medicare-specific intensity 

measure that is based on a 5-year adjusted 

average of cost per discharge for FY 2016 (we 

refer readers to the FY 2011 IPPS/LTCH PPS 

final rule (75 FR 50436) for a full description 

of our Medicare-specific intensity measure). 

Specifically, for FY 2016, we are proposing 

to use an intensity measure that is based on 

an average of cost per discharge data from the 

5-year period beginning with FY 2009 and 

extending through FY 2013. Based on these 

data, we estimated that case-mix constant 

intensity declined during FYs 2009 through 

2013. In the past, when we found intensity 

to be declining, we believed a zero (rather 

than a negative) intensity adjustment was 

appropriate. Consistent with this approach, 

because we estimate that intensity declined 

during that 5-year period, we believe it is 

appropriate to propose to continue to apply 

a zero intensity adjustment for FY 2016. 

Therefore, we are proposing to make a 0.0 

percentage point adjustment for intensity in 

the update for FY 2016. 

Above, we described the basis of the 

components used to develop the proposed 

1.3 percent capital update factor under the 

capital update framework for FY 2016 as 

shown in the table below. 

PROPOSED CMS FY 2016 UPDATE

FACTOR TO THE CAPITAL FEDERAL

RATE

Capital Input Price Index * .................. 1.3 

Intensity: ............................................. 0.0 

Case-Mix Adjustment Factors: 

Real Across DRG Change .......... ¥0.5 

Projected Case-Mix Change ....... 0.5 

Subtotal ....................................... 1.3 

Effect of FY 2014 Reclassification 

and Recalibration ............................ 0.0 

Forecast Error Correction ................... 0.0 

Total Update ................................ 1.3 

* The capital input price index is based on 

the FY 2010-based CIPI. 

b. Comparison of CMS and MedPAC Update 

Recommendation 

In its March 2015 Report to Congress, 

MedPAC did not make a specific update 

recommendation for capital IPPS payments 

for FY 2016. (We refer readers to MedPAC’s 

Report to the Congress: Medicare Payment 

Policy, March 2015, Chapter 3, available on 

the Web site at: http://www.medpac.gov.) 

2. Proposed Outlier Payment Adjustment 

Factor 

Section 412.312(c) establishes a unified 

outlier payment methodology for inpatient 

operating and inpatient capital-related costs. 

A single set of thresholds is used to identify 

outlier cases for both inpatient operating and 

inpatient capital-related payments. Section 

412.308(c)(2) provides that the standard 

Federal rate for inpatient capital-related costs 

be reduced by an adjustment factor equal to 

the estimated proportion of capital-related 

outlier payments to total inpatient capitalrelated PPS payments. The outlier thresholds 

are set so that operating outlier payments are 

projected to be 5.1 percent of total operating 

IPPS DRG payments. 

For FY 2015, we estimated that outlier 

payments for capital will equal 6.18 percent 

of inpatient capital-related payments based 

on the capital Federal rate in FY 2015. Based 

on the proposed thresholds as set forth in 

section II.A. of this Addendum, we estimate 

that outlier payments for capital-related costs 

would equal 6.43 percent for inpatient 

capital-related payments based on the 

proposed capital Federal rate in FY 2016. 

Therefore, we are proposing to apply an 

outlier adjustment factor of 0.9357 in 

determining the proposed capital Federal rate 

for FY 2016. Thus, we estimate that the 

percentage of capital outlier payments to 

total capital Federal rate payments for FY 

2016 will be higher than the percentage for 

FY 2015. 

The outlier reduction factors are not built 

permanently into the capital rates; that is, 

they are not applied cumulatively in 

determining the capital Federal rate. The 

proposed FY 2016 outlier adjustment of 

0.9357 is a ¥0.27 percent change from the 

FY 2015 outlier adjustment of 0.9382. 

Therefore, the proposed net change in the 

outlier adjustment to the capital Federal rate 

for FY 2016 is 0.9973 (0.9357/0.9382). Thus, 

the outlier adjustment would decrease the 

proposed FY 2016 capital Federal rate by 

0.27 percent compared to the FY 2015 outlier 

adjustment. 

3. Proposed Budget Neutrality Adjustment 

Factor for Changes in DRG Classifications 

and Weights and the GAF 

Section 412.308(c)(4)(ii) requires that the 

capital Federal rate be adjusted so that 

aggregate payments for the fiscal year based 

on the capital Federal rate after any changes 

resulting from the annual DRG 

reclassification and recalibration and changes 

in the GAF are projected to equal aggregate 

payments that would have been made on the 

basis of the capital Federal rate without such 

changes. Because we implemented a separate 

GAF for Puerto Rico, we apply separate 

budget neutrality adjustments for the 

national GAF and the Puerto Rico GAF. We 

apply the same budget neutrality factor for 

DRG reclassifications and recalibration 

nationally and for Puerto Rico. Separate 

adjustments were unnecessary for FY 1998 

and earlier because the GAF for Puerto Rico 

was implemented in FY 1998. 


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To determine the proposed factors for FY 

2016, we compared (separately for the 

national capital rate and the Puerto Rico 

capital rate) estimated aggregate capital 

Federal rate payments based on the FY 2015 

MS–DRG classifications and relative weights 

and the FY 2015 GAF to estimated aggregate 

capital Federal rate payments based on the 

FY 2015 MS–DRG classifications and relative 

weights and the proposed FY 2016 GAFs. To 

achieve budget neutrality for the changes in 

the national GAFs, based on calculations 

using updated data, we are proposing to 

apply an incremental budget neutrality 

adjustment factor of 0.9982 for FY 2016 to 

the previous cumulative FY 2015 adjustment 

factor of 0.9884, yielding a proposed 

adjustment factor of 0.9867 through FY 2016. 

For the Puerto Rico GAFs, we are proposing 

to apply an incremental budget neutrality 

adjustment factor of 0.9980 for FY 2016 to 

the previous cumulative FY 2015 adjustment 

factor of 1.0082, yielding a proposed 

cumulative adjustment factor of 1.0062 

through FY 2016. 

We then compared estimated aggregate 

capital Federal rate payments based on the 

FY 2015 MS–DRG relative weights and the 

proposed FY 2016 GAFs to estimated 

aggregate capital Federal rate payments based 

on the cumulative effects of the proposed FY 

2016 MS–DRG classifications and relative 

weights and the proposed FY 2016 GAFs. 

The proposed incremental adjustment factor 

for DRG classifications and changes in 

relative weights is 0.9994 both nationally and 

for Puerto Rico. The proposed cumulative 

adjustment factors for MS–DRG 

classifications and changes in relative 

weights and for changes in the GAFs through 

FY 2016 are 0.9861 nationally and 1.0056 for 

Puerto Rico. (We note that all the values are 

calculated with unrounded numbers.) The 

GAF/DRG budget neutrality adjustment 

factors are built permanently into the capital 

rates; that is, they are applied cumulatively 

in determining the capital Federal rate. This 

follows the requirement under 

§ 412.308(c)(4)(ii) that estimated aggregate 

payments each year be no more or less than 

they would have been in the absence of the 

annual DRG reclassification and recalibration 

and changes in the GAFs. 

The methodology used to determine the 

recalibration and geographic adjustment 

factor (GAF/DRG) budget neutrality 

adjustment is similar to the methodology 

used in establishing budget neutrality 

adjustments under the IPPS for operating 

costs. One difference is that, under the 

operating IPPS, the budget neutrality 

adjustments for the effect of geographic 

reclassifications are determined separately 

from the effects of other changes in the 

hospital wage index and the MS–DRG 

relative weights. Under the capital IPPS, 

there is a single GAF/DRG budget neutrality 

adjustment factor (the national capital rate 

and the Puerto Rico capital rate are 

determined separately) for changes in the 

GAF (including geographic reclassification) 

and the MS–DRG relative weights. In 

addition, there is no adjustment for the 

effects that geographic reclassification has on 

the other payment parameters, such as the 

payments for DSH or IME. 

The proposed cumulative adjustment 

factor accounts for the proposed MS–DRG 

reclassifications and recalibration and for 

proposed changes in the GAFs. It also 

incorporates the effects on the proposed 

GAFs of FY 2016 geographic reclassification 

decisions made by the MGCRB compared to 

FY 2015 decisions. However, it does not 

account for proposed changes in payments 

due to changes in the DSH and IME 

adjustment factors. 

4. Proposed Capital Federal Rate for FY 2016 

For FY 2015, we established a capital 

Federal rate of $434.97 (79 FR 59684). We are 

proposing to establish an update of 1.3 

percent in determining the FY 2016 capital 

Federal rate for all hospitals. As a result of 

this proposed update and the proposed 

budget neutrality factors discussed above, we 

are proposing to establish a national capital 

Federal rate of $438.40 for FY 2016. The 

proposed national capital Federal rate for FY 

2016 was calculated as follows: 

• The proposed FY 2016 update factor is 

1.0013, that is, the proposed update is 1.3 

percent. 

• The proposed FY 2016 budget neutrality 

adjustment factor that is applied to the 

proposed capital Federal rate for proposed 

changes in the MS–DRG classifications and 

relative weights and changes in the GAFs is 

0.9976. 

• The proposed FY 2016 outlier 

adjustment factor is 0.9357. 

(We note that, as discussed in section VI.C. 

of the preamble of this proposed rule, we are 

not proposing to make an additional MS– 

DRG documentation and coding adjustment 

to the capital IPPS Federal rates for FY 2016.) 

Because the proposed FY 2016 capital 

Federal rate has already been adjusted for 

differences in case-mix, wages, cost-of-living, 

indirect medical education costs, and 

payments to hospitals serving a 

disproportionate share of low-income 

patients, we are not proposing to make 

additional adjustments in the capital Federal 

rate for these factors, other than the proposed 

budget neutrality factor for proposed changes 

in the MS–DRG classifications and relative 

weights and for proposed changes in the 

GAFs. 

We are providing the following chart that 

shows how each of the proposed factors and 

adjustments for FY 2016 affects the 

computation of the proposed FY 2016 

national capital Federal rate in comparison to 

the FY 2015 national capital Federal rate. 

The proposed FY 2016 update factor has the 

effect of increasing the capital Federal rate by 

1.3 percent compared to the FY 2015 capital 

Federal rate. The proposed GAF/DRG budget 

neutrality adjustment factor has the effect of 

decreasing the capital Federal rate by 0.24 

percent. The proposed FY 2016 outlier 

adjustment factor has the effect of decreasing 

the capital Federal rate by 0.27 percent 

compared to the FY 2015 capital Federal rate. 

The combined effect of all the proposed 

changes would increase the proposed 

national capital Federal rate by 0.79 percent 

compared to the FY 2015 national capital 

Federal rate. 

COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2015 CAPITAL FEDERAL RATE AND PROPOSED FY 2016 CAPITAL

FEDERAL RATE

FY 2015 Proposed 

FY 2016 Change Percent change 

Update Factor 1 ................................................................................................ 1.0150 1.0130 1.0130 1.3 

GAF/DRG Adjustment Factor 1 ........................................................................ 0.9993 0.9976 0.9976 ¥0.24 

Outlier Adjustment Factor 2 .............................................................................. 0.9382 0.9357 0.9973 ¥0.27 

Capital Federal Rate ........................................................................................ $434.97 $438.40 .0079 0.79 

1The proposed update factor and the proposed GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal 

rates. Thus, for example, the proposed incremental change from FY 2015 to FY 2016 resulting from the application of the proposed 0.9976 GAF/

DRG budget neutrality adjustment factor for FY 2016 is a proposed net change of 0.9976 (or ¥0.24 percent). 2The proposed outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining the proposed capital Federal rate. Thus, for example, the proposed net change resulting from the application of the proposed FY 2016 

outlier adjustment factor is 0.9357/0.9382, or 0.9973 (or ¥0.27 percent). 

5. Proposed Special Capital Rate for Puerto 

Rico Hospitals 

Section 412.374 provides for the use of a 

blended payment system for payments made 

to hospitals located in Puerto Rico under the 

PPS for acute care hospital inpatient capitalrelated costs. Accordingly, under the capital 

PPS, we compute a separate payment rate 

specific to hospitals located in Puerto Rico 

using the same methodology used to compute 

the national Federal rate for capital-related 

costs. Under the broad authority of section 

1886(g) of the Act, beginning with discharges 

occurring on or after October 1, 2004, capital 

payments made to hospitals located in Puerto 

Rico are based on a blend of 25 percent of 

the Puerto Rico capital rate and 75 percent 

of the capital Federal rate. The Puerto Rico 


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capital rate is derived from the costs of 

Puerto Rico hospitals only, while the capital 

Federal rate is derived from the costs of all 

acute care hospitals participating in the IPPS 

(including Puerto Rico). 

To adjust hospitals’ capital payments for 

geographic variations in capital costs, we 

apply a GAF to both portions of the blended 

capital rate. The GAF is calculated using the 

operating IPPS wage index, and varies 

depending on the labor market area or rural 

area in which the hospital is located. We use 

the Puerto Rico wage index to determine the 

GAF for the Puerto Rico part of the capitalblended rate and the national wage index to 

determine the GAF for the national part of 

the blended capital rate. 

Because we implemented a separate GAF 

for Puerto Rico in FY 1998, we also apply 

separate budget neutrality adjustment factors 

for the national GAF and for the Puerto Rico 

GAF. However, we apply the same budget 

neutrality adjustment factor for MS–DRG 

reclassifications and recalibration nationally 

and for Puerto Rico. The proposed budget 

neutrality adjustment factors for the national 

GAF and for the Puerto Rico GAF and the 

proposed budget neutrality factor for MS– 

DRG reclassifications and recalibration 

(which is the same nationally and for Puerto 

Rico) are discussed in section III.A.3. of this 

Addendum. 

In computing the payment for a particular 

Puerto Rico hospital, the Puerto Rico portion 

of the capital rate (25 percent) is multiplied 

by the Puerto Rico-specific GAF for the labor 

market area in which the hospital is located, 

and the national portion of the capital rate 

(75 percent) is multiplied by the national 

GAF for the labor market area in which the 

hospital is located (which is computed from 

national data for all hospitals in the United 

States and Puerto Rico). 

For FY 2015, the special capital rate for 

hospitals located in Puerto Rico was $209.45 

(79 FR 59683). With the changes we are 

proposing to make to the factors used to 

determine the proposed capital Federal rate, 

the proposed FY 2016 special capital rate for 

hospitals in Puerto Rico is $213.77. 

B. Calculation of the Proposed Inpatient 

Capital-Related Prospective Payments for FY 

2016 

For purposes of calculating payments for 

each discharge during FY 2016, the capital 

Federal rate is adjusted as follows: (Standard 

Federal Rate) × (DRG weight) × (GAF) × 

(COLA for hospitals located in Alaska and 

Hawaii) × (1 + DSH Adjustment Factor + IME 

Adjustment Factor, if applicable). The result 

is the adjusted capital Federal rate. 

Hospitals also may receive outlier 

payments for those cases that qualify under 

the thresholds established for each fiscal 

year. Section 412.312(c) provides for a single 

set of thresholds to identify outlier cases for 

both inpatient operating and inpatient 

capital-related payments. The proposed 

outlier thresholds for FY 2016 are in section 

II.A. of this Addendum. For FY 2016, a case 

would qualify as a cost outlier if the cost for 

the case plus the (operating) IME and DSH 

payments (including both the empirically 

justified Medicare DSH payment and the 

estimated uncompensated care payment, as 

discussed in section II.A.4.g.(1) of this 

Addendum) is greater than the prospective 

payment rate for the MS–DRG plus the 

proposed fixed-loss amount of $24,485. 

Currently, as provided under 

§ 412.304(c)(2), we pay a new hospital 85 

percent of its reasonable costs during the first 

2 years of operation unless it elects to receive 

payment based on 100 percent of the capital 

Federal rate. Effective with the third year of 

operation, we pay the hospital based on 100 

percent of the capital Federal rate (that is, the 

same methodology used to pay all other 

hospitals subject to the capital PPS). 

C. Capital Input Price Index 

1. Background 

Like the operating input price index, the 

capital input price index (CIPI) is a fixedweight price index that measures the price 

changes associated with capital costs during 

a given year. The CIPI differs from the 

operating input price index in one important 

aspect—the CIPI reflects the vintage nature of 

capital, which is the acquisition and use of 

capital over time. Capital expenses in any 

given year are determined by the stock of 

capital in that year (that is, capital that 

remains on hand from all current and prior 

capital acquisitions). An index measuring 

capital price changes needs to reflect this 

vintage nature of capital. Therefore, the CIPI 

was developed to capture the vintage nature 

of capital by using a weighted-average of past 

capital purchase prices up to and including 

the current year. 

We periodically update the base year for 

the operating and capital input price indexes 

to reflect the changing composition of inputs 

for operating and capital expenses. In the FY 

2014 IPPS/LTCH PPS final rule (78 FR 50603 

through 50607), we rebased and revised the 

CIPI to a FY 2010 base year to reflect the 

more current structure of capital costs in 

hospitals. For a complete discussion of this 

rebasing, we refer readers to the FY 2014 

IPPS/LTCH PPS final rule. 

2. Forecast of the CIPI for FY 2016 

Based on the latest forecast by IHS Global 

Insight, Inc. (first quarter of 2015), we are 

forecasting the FY 2010-based CIPI to 

increase 1.3 percent in FY 2016. This reflects 

a projected 1.8 percent increase in vintageweighted depreciation prices (building and 

fixed equipment, and movable equipment), 

and a projected 2.6 percent increase in other 

capital expense prices in FY 2016, partially 

offset by a projected 1.2 percent decline in 

vintage-weighted interest expense prices in 

FY 2016. The weighted average of these three 

factors produces the forecasted 1.3 percent 

increase for the FY 2010-based CIPI as a 

whole in FY 2016. 

IV. Proposed Changes to Payment Rates for 

Excluded Hospitals: Proposed Rate-ofIncrease Percentages for FY 2016 

Payments for services furnished in 

children’s hospitals, 11 cancer hospitals, and 

hospitals located outside the 50 States, the 

District of Columbia and Puerto Rico (that is, 

short-term acute care hospitals located in the 

U.S. Virgin Islands, Guam, the Northern 

Mariana Islands, and American Samoa) that 

are excluded from the IPPS are made on the 

basis of reasonable costs based on the 

hospital’s own historical cost experience, 

subject to a rate-of-increase ceiling. A per 

discharge limit (the target amount as defined 

in § 413.40(a) of the regulations) is set for 

each hospital based on the hospital’s own 

cost experience in its base year, and updated 

annually by a rate-of-increase percentage. 

(We note that, in accordance with 

§ 403.752(a), RNHCIs are also subject to the 

rate-of-increase limits established under 

§ 413.40 of the regulations.) 

In this proposed rule, the FY 2016 rate-ofincrease percentage for updating the target 

amounts for the 11 cancer hospitals, 

children’s hospitals, the short-term acute care 

hospitals located in the U.S. Virgin Islands, 

Guam, the Northern Mariana Islands, and 

American Samoa, and RNHCIs is the 

estimated percentage increase in the FY 2016 

IPPS operating market basket, in accordance 

with applicable regulations at § 413.40. Based 

on IHS Global Insight, Inc.’s 2015 first 

quarter forecast, we estimate that the FY 

2010-based IPPS operating market basket 

update for FY 2016 is 2.7 percent (that is, the 

estimate of the market basket rate-ofincrease). However, we are proposing that if 

more recent data become available for the 

final rule, we would use them to calculate 

the IPPS operating market basket update for 

FY 2016. 

The IRF PPS, the IPF PPS, and the LTCH 

PPS are updated annually. We refer readers 

to section VII. of the preamble of this 

proposed rule and section V. of the 

Addendum to this proposed rule for the 

proposed update changes to the Federal 

payment rates for LTCHs under the LTCH 

PPS for FY 2016. The annual updates for the 

IRF PPS and the IPF PPS are issued by the 

agency in separate Federal Register 

documents. 

V. Proposed Updates to the Payment Rates 

for the LTCH PPS for FY 2016 

A. Proposed LTCH PPS Standard Federal 

Rate for FY 2016 

1. Background 

In section VII. of the preamble of this 

proposed rule, we discuss our proposed 

updates to the payment rates, factors, and 

specific policies under the LTCH PPS for FY 

2016. 

Under § 412.523(c)(3)(ii) of the regulations, 

for LTCH PPS rate years beginning RY 2004 

through RY 2006, we updated the standard 

Federal rate annually by a factor to adjust for 

the most recent estimate of the increases in 

prices of an appropriate market basket of 

goods and services for LTCHs. We 

established this policy of annually updating 

the standard Federal rate because, at that 

time, we believed that was the most 

appropriate method for updating the LTCH 

PPS standard Federal rate for years after the 

initial implementation of the LTCH PPS in 

FY 2003. Therefore, under § 412.523(c)(3)(ii), 

for RYs 2004 through 2006, the annual 

update to the LTCH PPS standard Federal 

rate was equal to the previous rate year’s 

Federal rate updated by the most recent 

estimate of increases in the appropriate 

market basket of goods and services included 

in covered inpatient LTCH services. 


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In determining the annual update to the 

standard Federal rate for RY 2007, based on 

our ongoing monitoring activity, we believed 

that, rather than solely using the most recent 

estimate of the LTCH PPS market basket 

update as the basis of the annual update 

factor, it was appropriate to adjust the 

standard Federal rate to account for the effect 

of documentation and coding in a prior 

period that was unrelated to patients’ 

severity of illness (71 FR 27818). 

Accordingly, we established under 

§ 412.523(c)(3)(iii) that the annual update to 

the standard Federal rate for RY 2007 was 

zero percent based on the most recent 

estimate of the LTCH PPS market basket at 

that time, offset by an adjustment to account 

for changes in case-mix in prior periods due 

to the effect of documentation and coding 

that were unrelated to patients’ severity of 

illness. For RY 2008 through FY 2011, we 

also made an adjustment to account for the 

effect of documentation and coding that was 

unrelated to patients’ severity of illness in 

establishing the annual update to the 

standard Federal rate as set forth in the 

regulations at § 412.523(c)(3)(iv) through 

(c)(3)(vii). For FYs 2012, 2013, 2014, and 

2015, we updated the standard Federal rate 

by the most recent estimate of the LTCH PPS 

market basket at that time, including 

additional statutory adjustments required by 

section 1886(m)(3)(A) of the Act as set forth 

in the regulations at § 412.523(c)(3)(viii) 

through (c)(3)(ix). 

Section 1886(m)(3)(A) of the Act, as added 

by section 3401(c) of the Affordable Care Act, 

specifies that, for rate year 2010 and each 

subsequent rate year, any annual update to 

the standard Federal rate shall be reduced: 

• For rate year 2010 through 2019, by the 

other adjustment specified in section 

1886(m)(3)(A)(ii) and (m)(4) of the Act; and 

• For rate year 2012 and each subsequent 

year, by the productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) of 

the Act (which we refer to as ‘‘the multifactor 

productivity (MFP) adjustment’’) as 

discussed in section VII.D.2. of the preamble 

of this proposed rule. 

Section 1886(m)(3)(B) of the Act provides 

that the application of paragraph (3) of 

section 1886(m) of the Act may result in the 

annual update being less than zero for a rate 

year, and may result in payment rates for a 

rate year being less than such payment rates 

for the preceding rate year. (As noted in 

section VII.D.2.a. of the preamble of this 

proposed rule, the annual update to the 

LTCH PPS occurs on October 1 and we have 

adopted the term ‘‘fiscal year’’ (FY) rather 

than ‘‘rate year’’ (RY) under the LTCH PPS 

beginning October 1, 2010. Therefore, for 

purposes of clarity, when discussing the 

annual update for the LTCH PPS, including 

the provisions of the Affordable Care Act, we 

use the term ‘‘fiscal year’’ rather than ‘‘rate 

year’’ for 2011 and subsequent years.) 

For FY 2015, consistent with our historical 

practice, we established an update to the 

LTCH PPS standard Federal rate based on the 

full estimated LTCH PPS market basket 

increase of 2.9 percent and the 0.7 percentage 

point reductions required by sections 

1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 

1886(m)(4)(E) of the Act. Accordingly, at 

§ 412.523(c)(3)(xi) of the regulations, we 

established an annual update of 2.2 percent 

to the standard Federal rate for FY 2015 (79 

FR 50391through 50392). 

For FY 2016, as discussed in greater detail 

in section VII.D.2. of the preamble of this 

proposed rule, we are proposing to establish 

an annual update to the LTCH PPS standard 

Federal payment rate based on the full 

estimated increase in the LTCH PPS market 

basket, less the MFP adjustment consistent 

with section 1886(m)(3)(A)(i) of the Act, and 

less the 0.2 percentage point required by 

sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the 

Act. In addition, as discussed in greater 

detail in section VII.D.2. of the preamble of 

this proposed rule, the annual update will be 

further reduced by 2.0 percentage points for 

LTCHs that fail to submit quality reporting 

data in accordance with the requirements of 

the LTCH QRP under section 1886(m)(5) of 

the Act. 

Specifically, in this proposed rule, based 

on the best available data, we are proposing 

to establish an annual update to the standard 

Federal rate of 1.9 percent, which is based on 

the full estimated increase in the LTCH PPS 

market basket of 2.7 percent, less the 

proposed MFP adjustment of 0.6 percentage 

point consistent with section 

1886(m)(3)(A)(i) of the Act, and less the 0.2 

percentage point required by sections 

1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. For 

LTCHs that fail to submit the required quality 

reporting data for FY 2016 in accordance 

with the LTCH QRP, the proposed annual 

update is further reduced by 2.0 percentage 

points as required by section 1886(m)(5) of 

the Act (as discussed in greater detail in 

section VII.D.2.c. of the preamble of this 

proposed rule). Accordingly, we are 

proposing to establish an annual update to 

the LTCH PPS standard Federal rate of ¥0.1 

percent for LTCHs that fail to submit the 

required quality reporting data for FY 2016. 

This proposed ¥0.1 percent update is 

calculated based on the full estimated 

increase in the LTCH PPS market basket of 

2.7 percent, less a proposed MFP adjustment 

of 0.6 percentage point, less an additional 

adjustment of 0.2 percentage point required 

by the statute, and less 2.0 percentage points 

for failure to submit quality reporting data as 

required by section 1886(m)(5) of the Act. 

2. Development of the Proposed FY 2016 

LTCH PPS Standard Federal Payment Rate 

We continue to believe that the annual 

update to the LTCH PPS standard Federal 

payment rate should be based on the most 

recent estimate of the increase in the LTCH 

PPS market basket, including any statutory 

adjustments. Consistent with our historical 

practice, for FY 2016, we are proposing to 

apply the annual update to the LTCH PPS 

standard Federal rate from the previous year. 

Furthermore, in determining the proposed 

LTCH PPS standard Federal payment rate for 

FY 2016, we also are proposing to make 

certain regulatory adjustments, consistent 

with past practices. Specifically, in 

determining the proposed FY 2016 LTCH 

PPS standard Federal payment rate, we are 

proposing to apply a budget neutrality 

adjustment factor for the proposed changes 

related to the proposed area wage adjustment 

(that is, proposed changes to the wage data 

and proposed labor-related share) in 

accordance with § 412.523(d)(4). We also are 

proposing that if more recent data become 

available, we would use that data, if 

appropriate, to determine the update to the 

LTCH PPS standard Federal payment rate for 

FY 2016 in the final rule. 

For FY 2015, we established an annual 

update to the LTCH PPS standard Federal 

rate of 2.2 percent for FY 2015 based on the 

full estimated LTCH PPS market basket 

increase of 2.9 percent, less the MFP 

adjustment of 0.5 percentage point consistent 

with section 1886(m)(3)(A)(i) of the Act and 

less the 0.2 percentage point required by 

sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the 

Act. Accordingly, at § 412.523(c)(3)(xi), we 

established an annual update to the standard 

Federal rate for FY 2015 of 2.2 percent. That 

is, we applied an update factor of 1.022 to 

the FY 2014 Federal rate of $40,607.31 to 

determine the FY 2015 standard Federal rate. 

The standard Federal rate for FY 2015 was 

further adjusted by an adjustment factor of 

0.98734 for FY 2015 under the final year of 

the 3-year phase-in of the one-time 

prospective adjustment at § 412.523(d)(3)(ii). 

We also applied an area wage level budget 

neutrality factor for FY 2015 of 1.0016703 to 

the standard Federal rate to ensure that any 

changes to the area wage level adjustment 

would not result in any change in estimated 

aggregate LTCH PPS payments. 

Consequently, we established a standard 

Federal rate for FY 2015 of $41,043.71 

(calculated as $40,607.31 × 1.022 × 0.98734 

× 1.001670) (79 FR 50392). 

In this proposed rule, we are proposing to 

establish an annual update to the LTCH PPS 

standard Federal payment rate of 1.9 percent, 

which was determined using the 

methodology previously described. 

Therefore, consistent with our proposal, 

under proposed § 412.523(c)(3)(xii), we are 

proposing to apply a factor of 1.019 to the FY 

2015 standard Federal rate of $41,043.71 to 

determine the proposed FY 2016 LTCH PPS 

standard Federal payment rate. These 

proposed factors are based on IGI’s first 

quarter 2015 forecast, which are the best 

available data at this time. For LTCHs that 

fail to submit quality reporting data for FY 

2016 under the LTCH QRP, consistent with 

our proposal, under proposed 

§ 412.523(c)(3)(xii), applied in conjunction 

with the provisions of § 412.523(c)(4), we are 

proposing to reduce the annual update to the 

LTCH PPS standard Federal payment rate by 

an additional 2.0 percentage points 

consistent with section 1886(m)(5) of the Act. 

In those cases, the LTCH PPS standard 

Federal payment rate would be updated by 

¥0.1 percent (that is, a proposed update 

factor of 0.999) for FY 2016 for LTCHs that 

fail to submit the required quality reporting 

data for FY 2016 as required under the LTCH 

QRP. Consistent with § 412.523(d)(4), we also 

are proposing to apply a proposed area wage 

level budget neutrality factor to the FY 2016 

standard Federal rate of 1.001444, which was 

determined using the methodology 

previously described. We are proposing to 

apply this area wage level budget neutrality 

factor to the FY 2016 LTCH PPS standard 

Federal payment rate to ensure that any 

changes to the area wage level adjustment 


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(that is, the annual update of the wage index 

values and labor-related share) will not result 

in any change (increase or decrease) in 

estimated aggregate LTCH PPS standard 

Federal payment rate payments. Accordingly, 

we are proposing to establish a LTCH PPS 

standard Federal payment rate of $41,883.93 

(calculated as $41,043.71 × 1.019 × 1.001444) 

for FY 2016. For LTCHs that fail to submit 

quality reporting data for FY 2016 in 

accordance with the requirements of the 

LTCHQRP under section 1886(m)(5) of the 

Act, we are proposing to establish a LTCH 

PPS standard Federal payment rate of 

$41,061.87 (calculated as $41,043.71 × 0.999 

× 1.001444) for FY 2016. Consistent with our 

historical practice, we are proposing that if 

more recent data is available, we would use 

such data to calculate the standard Federal 

rates for FY 2016 in the final rule. We note, 

as discussed in section VII.B. of the preamble 

to this proposed rule, under our proposed 

application of the site neutral payment rate 

required under section 1886(m)(6) of the Act, 

this LTCH PPS standard Federal payment 

rate would only be used to determine 

payments for LTCH PPS standard Federal 

payment rate cases (that is, those LTCH PPS 

cases that meet the statutory criteria to be 

excluded from the site neutral payment rate). 

B. Proposed Adjustment for Area Wage 

Levels for the LTCH PPS Standard Federal 

Payment Rate for FY 2016 

1. Background 

Under the authority of section 123 of the 

BBRA, as amended by section 307(b) of the 

BIPA, we established an adjustment to the 

LTCH PPS standard Federal rate to account 

for differences in LTCH area wage levels 

under § 412.525(c). The labor-related share of 

the LTCH PPS standard Federal rate is 

adjusted to account for geographic 

differences in area wage levels by applying 

the applicable LTCH PPS wage index. The 

applicable LTCH PPS wage index is 

computed using wage data from inpatient 

acute care hospitals without regard to 

reclassification under section 1886(d)(8) or 

section 1886(d)(10) of the Act. 

When we implemented the LTCH PPS, we 

established a 5-year transition to the full area 

wage level adjustment. The area wage level 

adjustment was completely phased-in for 

cost reporting periods beginning in FY 2007. 

Therefore, for cost reporting periods 

beginning on or after October 1, 2006, the 

applicable LTCH area wage index values are 

the full LTCH PPS area wage index values 

calculated based on acute care hospital 

inpatient wage index data without taking into 

account geographic reclassification under 

section 1886(d)(8) and section 1886(d)(10) of 

the Act. For additional information on the 

phase-in of the area wage level adjustment 

under the LTCH PPS, we refer readers to the 

August 30, 2002 LTCH PPS final rule (67 FR 

56015 through 56019) and the RY 2008 LTCH 

PPS final rule (72 FR 26891). 

2. Proposed Geographic Classifications 

(Labor Market Areas) for the LTCH PPS 

Standard Federal Payment Rate 

In adjusting for the differences in area 

wage levels under the LTCH PPS, the laborrelated portion of an LTCH’s Federal 

prospective payment is adjusted by using an 

appropriate area wage index based on the 

geographic classification (labor market area) 

in which the LTCH is located. Specifically, 

the application of the LTCH PPS area wage 

level adjustment under existing § 412.525(c) 

is made based on the location of the LTCH— 

either in an ‘‘urban area,’’ or a ‘‘rural area,’’ 

as defined in § 412.503. Under § 412.503, an 

‘‘urban area’’ is defined as a Metropolitan 

Statistical Area (MSAs) (which includes a 

Metropolitan division, where applicable), as 

defined by the Executive OMB and a ‘‘rural 

area’’ is defined as any area outside of an 

urban area. 

The CBSA-based geographic classifications 

(labor market area definitions) currently used 

under the LTCH PPS, effective for discharges 

occurring on or after October 1, 2014, are 

based on the new OMB labor market area 

delineations based on the 2010 Decennial 

Census data. We made these revisions 

because we believe that these OMB 

delineations are based on the best available 

data that reflect the local economies and area 

wage levels of the hospitals that are currently 

located in these geographic areas. We also 

believe that these OMB delineations will 

ensure that the LTCH PPS area wage level 

adjustment most appropriately accounts for 

and reflects the relative hospital wage levels 

in the geographic area of the hospital as 

compared to the national average hospital 

wage level. We noted that this policy was 

consistent with the IPPS policy adopted in 

FY 2015 under § 412.64(b)(1)(ii)(D) of the 

regulations (79 FR 49951 through 49963). 

(For additional information on the CBSAbased labor market area (geographic 

classification) delineations currently used 

under the LTCH PPS and the history of the 

labor market area definitions used under the 

LTCH PPS, we refer readers to the FY 2015 

IPPS/LTCH PPS final rule (79 FR 50180 

through 50185).) 

In general, it is our historical practice to 

update the CBSA-based labor market area 

delineations annually based on the most 

recent updates issued by OMB. At the time 

of the development of this proposed rule, 

OMB had not issued any further updates 

subsequent to OMB Bulletin No. 13–01, 

which was dated February 28, 2013, and 

established revised delineations based on 

2010 Census Bureau data that were 

subsequently adopted in the FY 2015 IPPS/ 

LTCH PPS final rule. (The OMB bulletins are 

available on the OMB Web site at: http://

www.whitehouse.gov/omb. Go to 

‘‘Information For Agencies’’ and click on 

‘‘Bulletins’’.) Therefore, for FY 2016, we are 

proposing to continue to use the CBSA-based 

labor market area delineations currently used 

under the LTCH PPS (as adopted in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 50180 

through 50185)). We believe that these CBSAbased labor market area delineations will 

ensure that the LTCH PPS area wage level 

adjustment most appropriately accounts for 

and reflects the relative hospital wage levels 

in the geographic area of the hospital as 

compared to the national average hospital 

wage level based on the best available data 

that reflect the local economies and area 

wage levels of the hospitals that are currently 

located in these geographic areas. 

3. Proposed Labor-Related Share for the 

LTCH PPS Standard Federal Payment Rate 

Under the payment adjustment for the 

differences in area wage levels under 

§ 412.525(c), the labor-related share of an 

LTCH’s PPS Federal prospective payment is 

adjusted by the applicable wage index for the 

labor market area in which the LTCH is 

located. The LTCH PPS labor-related share 

currently represents the sum of the laborrelated portion of operating costs (Wages and 

Salaries; Employee Benefits; Professional 

Fees Labor-Related, Administrative and 

Business Support Services; and All-Other: 

Labor-Related Services) and a labor-related 

portion of capital costs using the applicable 

LTCH PPS market basket. Additional 

background information on the historical 

development of the labor-related share under 

the LTCH PPS and the development of the 

RPL market basket can be found in the RY 

2007 LTCH PPS final rule (71 FR 27810 

through 27817 and 27829 through 27830) and 

the FY 2012 IPPS/LTCH PPS final rule (76 FR 

51766 through 51769 and 51808). 

For FY 2013, we revised and rebased the 

market basket used under the LTCH PPS by 

adopting the newly created FY 2009-based 

LTCH-specific market basket. In addition, we 

determined the labor-related share for FY 

2013 as the sum of the FY 2013 relative 

importance of each labor-related cost 

category of the FY 2009-based LTCH-specific 

market basket. For more details, we refer 

readers to the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53477 through 53479). Consistent 

with our historical practice, in the FY 2015 

IPPS/LTCH PPS final rule (79 FR 

50393through 50394), we determined the 

LTCH PPS labor-related share for FY 2015 

based on the FY 2015 relative importance of 

each labor-related cost category, which 

reflected the different rates of price change 

for these cost categories between the base 

year (FY 2009) and FY 2015. Specifically, 

based on IGI’s second quarter 2014 forecast 

of the FY 2009-based LTCH-specific market 

basket, we established a labor-related share 

under the LTCH PPS for FY 2015 of 62.306 

percent. 

For FY 2016, we are proposing to establish 

a labor-related share for the LTCH PPS 

standard Federal payment rate payments 

based on IGI’s first quarter 2015 forecast of 

the FY 2009-based LTCH-specific market 

basket. Consistent with our historical 

practice, we also are proposing that if more 

recent data become available, we would use 

such data, if appropriate, to determine the 

final FY 2016 labor-related share. In addition, 

we are proposing to specify the labor-related 

share to one decimal place, which is 

consistent with the IPPS labor-related share 

and the LTCH market basket update. The 

following table shows the proposed FY 2016 

labor-related share relative importance using 

IGI’s first quarter 2015 forecast of the FY 

2009-based LTCH-specific market basket. The 

sum of the relative importance for FY 2016 

for operating costs (Wages and Salaries; 

Employee Benefits; Professional Fees LaborRelated, Administrative and Business 

Support Services; and All Other: LaborRelated Services) is 58.1 percent. We are 

proposing to establish that the portion of 

capital-related costs that is influenced by the 


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local labor market would continue to be 

estimated to be 46 percent. Because the 

relative importance for capital-related costs 

would be 9.0 percent of the FY 2009-based 

LTCH-specific market basket in FY 2016, we 

are proposing to take 46 percent of 9.0 

percent to determine the labor-related share 

of capital-related costs for FY 2016, which 

would result in 4.1 percent (0.46 × 9.0). We 

then added that 4.1 percent for the capitalrelated cost amount to the 58.1 percent for 

the operating cost amount to determine the 

total proposed labor-related share for FY 

2016. Therefore, under the broad authority of 

section 123 of the BBRA, as amended by 

section 307(b) of BIPA, to determine 

appropriate payment adjustments under the 

LTCH PPS, we are proposing to establish a 

labor-related share under the LTCH PPS for 

FY 2016 of 62.2 percent. This proposed 

labor-related share is determined using the 

same methodology as used in calculating all 

previous fiscal years LTCH labor-related 

shares. 

PROPOSED FY 2016 LABOR-RELATED

SHARE RELATIVE IMPORTANCE

BASED ON THE FY 2009–BASED

LTCH–SPECIFIC MARKET BASKET

Proposed FY 2016 

labor-related share 

relative importance 

Wages and Salaries ..... 44.8 

Employee Benefits ........ 8.1 

Professional Fees: 

Labor-Related ........... 2.2 

Administrative and Business Support Services ............................ 0.5 

All Other: Labor-Related 

Services .................... 2.5 

Subtotal ......................... 58.1 

Proposed Labor-Related 

Portion of Capital 

Costs (46 percent) .... 4.1 

Proposed Total LaborRelated Share ........... 62.2 

4. Proposed Wage Index for FY 2016 for the 

LTCH PPS Standard Federal Payment Rate 

Historically, we have established LTCH 

PPS area wage index values calculated from 

acute care IPPS hospital wage data without 

taking into account geographic 

reclassification under sections 1886(d)(8) and 

1886(d)(10) of the Act (67 FR 56019). The 

area wage level adjustment established under 

the LTCH PPS is based on an LTCH’s actual 

location without regard to the ‘‘urban’’ or 

‘‘rural’’ designation of any related or 

affiliated provider. 

In the FY 2015 LTCH PPS final rule (79 FR 

50394through 50396), we calculated the FY 

2015 LTCH PPS area wage index values using 

the same data used for the FY 2015 acute care 

hospital IPPS (that is, data from cost 

reporting periods beginning during FY 2011), 

without taking into account geographic 

reclassification under sections 1886(d)(8) and 

1886(d)(10) of the Act, as these were the most 

recent complete data available at that time. 

In that same final rule, we indicated that we 

computed the FY 2015 LTCH PPS area wage 

index values consistent with the urban and 

rural geographic classifications (labor market 

areas) that were in place at that time, and 

consistent with the pre-reclassified IPPS 

wage index policy (that is, our historical 

policy of not taking into account IPPS 

geographic reclassifications in determining 

payments under the LTCH PPS). As with the 

IPPS wage index, wage data for multicampus 

hospitals with campuses located in different 

labor market areas (CBSAs) are apportioned 

to each CBSA where the campus (or 

campuses) are located. We also continued to 

use our existing policy for determining area 

wage index values for areas where there are 

no IPPS wage data. 

Consistent with our historical 

methodology, to determine the applicable 

area wage index values for the FY 2016 LTCH 

PPS standard Federal payment rate, under 

the broad authority of section 123 of the 

BBRA, as amended by section 307(b) of the 

BIPA, we are proposing to use wage data 

collected from cost reports submitted by IPPS 

hospitals for cost reporting periods beginning 

during FY 2012, without taking into account 

geographic reclassification under sections 

1886(d)(8) and 1886(d)(10) of the Act. We are 

proposing to use FY 2012 wage data because 

these data are the most recent complete data 

available. We also noted that these are the 

same data used to compute the proposed FY 

2016 acute care hospital inpatient wage 

index, as discussed in section III. of the 

preamble of this proposed rule. We are 

proposing to compute the proposed FY 2016 

LTCH PPS standard Federal payment rate 

area wage index values consistent with the 

‘‘urban’’ and ‘‘rural’’ geographic 

classifications (that is, labor market area 

delineations, as previously discussed in 

section V.B.2. of this Addendum) and our 

historical policy of not taking into account 

IPPS geographic reclassifications under 

sections 1886(d)(8) and 1886(d)(10) of the 

Act in determining payments under the 

LTCH PPS. We also are proposing to 

continue to apportion wage data for 

multicampus hospitals with campuses 

located in different labor market areas to each 

CBSA where the campus or campuses are 

located, consistent with the IPPS policy. 

Lastly, under our proposed methodology for 

determining the FY 2016 LTCH PPS standard 

Federal payment rate area wage index values, 

we are proposing to continue to use our 

existing policy for determining area wage 

index values for areas where there are no 

IPPS wage data. 

Under our existing methodology, the LTCH 

PPS wage index value for urban CBSAs with 

no IPPS wage data would be determined by 

using an average of all of the urban areas 

within the State and the LTCH PPS wage 

index value for rural areas with no IPPS wage 

data would be determined by using the 

unweighted average of the wage indices from 

all of the CBSAs that are contiguous to the 

rural counties of the State. 

Based on the FY 2012 IPPS wage data that 

we are proposing to use to determine the 

proposed FY 2016 LTCH PPS standard 

Federal payment rate area wage index values 

in this proposed rule, there are no IPPS wage 

data for the urban area of Hinesville, GA 

(CBSA 25980). Consistent with the 

methodology discussed above, we calculated 

the proposed FY 2016 wage index value for 

CBSA 25980 as the average of the wage index 

values for all of the other urban areas within 

the State of Georgia (that is, CBSAs 10500, 

12020, 12060, 12260, 15260, 16860, 17980, 

19140, 23580, 31420, 40660, 42340, 46660 

and 47580), as shown in Table 12A, which 

is listed in section VI. of the Addendum to 

this proposed rule and available via the 

Internet on the CMS Web site). We note that, 

as IPPS wage data are dynamic, it is possible 

that urban areas without IPPS wage data will 

vary in the future. 

Based on the FY 2012 IPPS wage data that 

we are proposing to use to determine the 

proposed FY 2016 LTCH PPS standard 

Federal payment rate area wage index values 

in this proposed rule, there are no rural areas 

without IPPS hospital wage data. Therefore, 

it is not necessary to use our established 

methodology to calculate a proposed LTCH 

PPS standard Federal payment rate wage 

index value for proposed rural areas with no 

IPPS wage data for FY 2016. We note that, 

as IPPS wage data are dynamic, it is possible 

that the number of rural areas without IPPS 

wage data will vary in the future. The 

proposed FY 2016 LTCH PPS standard 

Federal payment rate wage index values that 

would be applicable for LTCH PPS standard 

Federal payment rate discharges occurring on 

or after October 1, 2015, through September 

30, 2016, are presented in Table 12A (for 

urban areas) and Table 12B (for rural areas), 

which are listed in section VI. of the 

Addendum of this proposed rule and 

available via the Internet on the CMS Web 

site. 

5. Proposed Budget Neutrality Adjustment 

for Proposed Changes to the LTCH PPS 

Standard Federal Payment Rate Area Wage 

Level Adjustment 

Historically, the LTCH PPS wage index and 

labor-related share are updated annually 

based on the latest available data. Under 

§ 412.525(c)(2), any changes to the area wage 

index values or labor-related share are to be 

made in a budget neutral manner such that 

estimated aggregate LTCH PPS payments are 

unaffected; that is, will be neither greater 

than nor less than estimated aggregate LTCH 

PPS payments without such changes to the 

area wage level adjustment. Under this 

policy, we determine an area wage-level 

adjustment budget neutrality factor that will 

be applied to the standard Federal rate to 

ensure that any changes to the area wage 

level adjustments are budget neutral such 

that any changes to the area wage index 

values or labor-related share would not result 

in any change (increase or decrease) in 

estimated aggregate LTCH PPS payments. 

Accordingly, under § 412.523(d)(4), we apply 

an area wage level adjustment budget 

neutrality factor in determining the standard 

Federal rate, and we also established a 

methodology for calculating an area wage 

level adjustment budget neutrality factor. 

(For additional information on the 

establishment of our budget neutrality policy 

for changes to the area wage level 

adjustment, we refer readers to the FY 2012 

IPPS/LTCH PPS final rule (76 FR 51771 

through 51773 and 51809).) 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24645 

In this proposed rule, for FY 2016 LTCH 

PPS standard Federal payment rate cases, in 

accordance with § 412.523(d)(4), we are 

proposing to apply an area wage level 

adjustment budget neutrality factor to adjust 

the standard Federal rate to account for the 

estimated effect of the proposed adjustments 

or updates to the area wage level adjustment 

under § 412.525(c)(1) on estimated aggregate 

LTCH PPS payments using a methodology 

that is consistent with the methodology we 

established in the FY 2012 IPPS/LTCH PPS 

final rule (76 FR 51773). Specifically, we are 

proposing to determine an area wage level 

adjustment budget neutrality factor that 

would be applied to the LTCH PPS standard 

Federal payment rate under § 412.523(d)(4) 

for FY 2016 using the following 

methodology: 

Step 1—We simulated estimated aggregate 

LTCH PPS standard Federal payment rate 

payments using the FY 2015 wage index 

values, including the 50/50 blended area 

wage index values, as applicable, and the FY 

2015 labor-related share of 62.306 percent (as 

established in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50393 and 50397). 

Step 2—We simulated estimated aggregate 

LTCH PPS standard Federal payment rate 

payments using the proposed FY 2016 wage 

index values (as shown in Tables 12A and 

12B listed in the Addendum to this proposed 

rule and available via the Internet on the 

CMS Web site) and the proposed FY 2016 

labor-related share of 62.2 percent (based on 

the latest available data as previously 

discussed previously in this Addendum). 

Step 3—We calculated the ratio of these 

estimated total LTCH PPS standard Federal 

payment rate payments by dividing the 

estimated total LTCH PPS standard Federal 

payment rate payments using the FY 2015 

area wage level adjustments (calculated in 

Step 1) by the estimated total LTCH PPS 

standard Federal payment rate payments 

using the proposed FY 2016 area wage level 

adjustments (calculated in Step 2) to 

determine the proposed area wage level 

adjustment budget neutrality factor for FY 

2016 LTCH PPS standard Federal payment 

rate payments. 

Step 4—We then applied the proposed FY 

2016 area wage level adjustment budget 

neutrality factor from Step 3 to determine the 

proposed FY 2016 LTCH PPS standard 

Federal payment rate after the application of 

the proposed FY 2016 annual update 

(discussed previously in section V.A.2. of 

this Addendum). 

We note that, under the statutory dual-rate 

LTCH PPS payment structure, only LTCH 

PPS cases that meet the statutory criteria to 

be excluded from the site neutral payment 

rate (that is, LTCH PPS standard Federal 

payment rate cases) would be paid based on 

the LTCH PPS standard Federal payment 

rate. Because the area wage level adjustment 

under § 412.525(c) is an adjustment to the 

LTCH PPS standard Federal payment rate, we 

only used data from claims that would have 

qualified for payment at the LTCH PPS 

standard Federal payment rate if such rate 

were in effect at the time of discharge to 

calculate the proposed FY 2016 LTCH PPS 

standard Federal payment rate area wage 

level adjustment budget neutrality factor 

described above. (For additional information 

on our proposed application of site neutral 

payment rate required under section 

1886(m)(6) of the Act, we refer readers to 

section VII.B. of the preamble of this 

proposed rule.) 

For this proposed rule, using the steps in 

the methodology described above, we 

determined a proposed FY 2016 LTCH PPS 

standard Federal payment rate area wage 

level adjustment budget neutrality factor of 

1.001444. Accordingly, in section V.A.2. of 

the Addendum to this proposed rule, to 

determine the proposed FY 2016 LTCH PPS 

standard Federal payment rate, we are 

proposing to apply an area wage level 

adjustment budget neutrality factor of 

1.001444, in accordance with § 412.523(d)(4). 

The proposed FY 2016 LTCH PPS standard 

Federal payment rate shown in Table 1E of 

the Addendum to this proposed rule reflects 

this adjustment factor. 

C. Proposed LTCH PPS Cost-of-Living 

Adjustment (COLA) for LTCHs Located in 

Alaska and Hawaii 

Under § 412.525(b), a cost-of-living 

adjustment (COLA) is provided for LTCHs 

located in Alaska and Hawaii to account for 

the higher costs incurred in those States. 

Specifically, we apply a COLA to payments 

to LTCHs located in Alaska and Hawaii by 

multiplying the nonlabor-related portion of 

the standard Federal payment rate by the 

applicable COLA factors established annually 

by CMS. Higher labor-related costs for LTCHs 

located in Alaska and Hawaii are taken into 

account in the adjustment for area wage 

levels described above. 

Under our current methodology, we update 

the COLA factors for Alaska and Hawaii 

every 4 years (at the same time as the update 

to the labor-related share of the IPPS market 

basket) (77 FR 53712 through 53713). This 

methodology is based on a comparison of the 

growth in the Consumer Price Indexes (CPIs) 

for Anchorage, Alaska, and Honolulu, 

Hawaii, relative to the growth in the CPI for 

the average U.S. city as published by the 

Bureau of Labor Statistics (BLS). It also 

includes a 25-percent cap on the CPI-updated 

COLA factors. (For additional details on our 

current methodology for updating the COLA 

factors for Alaska and Hawaii, we refer 

readers to section VII.D.3. of the preamble of 

the FY 2013 IPPS/LTCH PPS final rule (77 FR 

53481 through 53482).) 

We continue to believe that determining 

updated COLA factors using this 

methodology would appropriately adjust the 

nonlabor-related portion of the LTCH PPS 

standard Federal payment rate for LTCHs 

located in Alaska and Hawaii. Under our 

finalized policy, we update the COLA factors 

using the methodology described above every 

4 years; the first year began in FY 2014 (77 

FR 53482). Therefore, in this proposed rule, 

for FY 2016, under the broad authority 

conferred upon the Secretary by section 123 

of the BBRA, as amended by section 307(b) 

of the BIPA, to determine appropriate 

payment adjustments under the LTCH PPS, 

we are proposing to continue to use the 

COLA factors based on the 2009 OPM COLA 

factors updated through 2012 by the 

comparison of the growth in the CPIs for 

Anchorage, Alaska, and Honolulu, Hawaii, 

relative to the growth in the CPI for the 

average U.S. city as established in the FY 

2014 IPPS/LTCH PPS final rule. (We refer 

readers to the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50998) for a discussion of the FY 

2014 COLA factors.) Consistent with our 

historical practice, we are proposing to 

establish that the COLA factors shown in the 

following table would be used to adjust the 

nonlabor-related portion of the LTCH PPS 

standard Federal payment rate for LTCHs 

located in Alaska and Hawaii under 

§ 412.525(b). 

PROPOSED COST-OF-LIVING ADJUSTMENT FACTORS FOR ALASKA AND HAWAII HOSPITALS UNDER THE LTCH PPS FOR FY 

2016 

Alaska: 

City of Anchorage and 80-kilometer (50-mile) radius by road ................................................................................................. 1.23 

City of Fairbanks and 80-kilometer (50-mile) radius by road .................................................................................................. 1.23 

City of Juneau and 80-kilometer (50-mile) radius by road ...................................................................................................... 1.23 

All other areas of Alaska .......................................................................................................................................................... 1.25 

Hawaii: 

City and County of Honolulu .................................................................................................................................................... 1.25 

County of Hawaii ...................................................................................................................................................................... 1.19 

County of Kauai ........................................................................................................................................................................ 1.25 

County of Maui and County of Kalawao .................................................................................................................................. 1.25 


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D. Proposed Adjustment for LTCH PPS HighCost Outlier (HCO) Cases 

1. Overview 

a. Background 

Under the broad authority conferred upon 

the Secretary by section 123 of the BBRA as 

amended by section 307(b) of the BIPA, in 

the regulations at § 412.525(a), we 

established an adjustment for additional 

payments for outlier cases that have 

extraordinarily high costs relative to the costs 

of most discharges. We refer to these cases as 

high cost outliers (HCOs). Providing 

additional payments for outliers strongly 

improves the accuracy of the LTCH PPS in 

determining resource costs at the patient and 

hospital level. These additional payments 

reduce the financial losses that would 

otherwise be incurred when treating patients 

who require more costly care and, therefore, 

reduce the incentives to underserve these 

patients. Under our current HCO policy at 

§ 412.525(a), we set the outlier threshold 

before the beginning of the applicable rate 

year so that total estimated outlier payments 

are projected to equal 8 percent of total 

estimated payments under the LTCH PPS. 

Under the current HCO policy, we make 

outlier payments for any discharges if the 

estimated cost of a case exceeds the adjusted 

payment under the LTCH PPS standard 

Federal payment rate plus a fixed-loss 

amount. Specifically, in accordance with 

existing § 412.525(a)(3), we make an 

additional payment for an HCO case that is 

equal to 80 percent of the difference between 

the estimated cost of the patient case and the 

outlier threshold, which is the sum of the 

adjusted payment under the LTCH PPS 

standard Federal payment rate and the fixedloss amount. The fixed-loss amount is the 

amount used to limit the loss that a hospital 

incurs under the outlier policy for a case 

with unusually high costs before the LTCH 

will receive any additional payments. This 

results in Medicare and the LTCH sharing 

financial risk in the treatment of 

extraordinarily costly cases. Under the 

current LTCH PPS HCO policy, the LTCH’s 

loss is limited to the fixed-loss amount and 

a fixed percentage of costs above the outlier 

threshold (the adjusted LTCH PPS standard 

Federal payment rate payment plus the fixedloss amount). The fixed percentage of costs 

is called the marginal cost factor. We 

calculate the estimated cost of a case by 

multiplying the Medicare allowable covered 

charge by the hospital’s overall hospital costto-charge ratio (CCR). 

Under the current HCO policy at 

§ 412.525(a), we determine a fixed-loss 

amount, that is, the maximum loss that an 

LTCH can incur under the LTCH PPS for a 

case with unusually high costs before the 

LTCH will receive any additional payments. 

We calculate the fixed-loss amount by 

estimating aggregate payments with and 

without an outlier policy. The fixed-loss 

amount results in estimated total outlier 

payments being projected to be equal to 8 

percent of projected total LTCH PPS 

payments. Currently, MedPAR claims data 

and CCRs based on data from the most recent 

Provider-Specific File (PSF) (or from the 

applicable statewide average CCR if an 

LTCH’s CCR data are faulty or unavailable) 

are used to establish a fixed-loss threshold 

amount under the LTCH PPS. 

b. Application of the Site Neutral Payment 

Rate 

Section 1206 of Public Law 113–67 

establishes a new dual-rate LTCH PPS 

payment structure with two distinct payment 

rates for LTCH discharges, beginning in FY 

2016. To implement this statutory change, as 

discussed in section VII.B. of the preamble of 

this proposed rule, we are proposing to pay 

hospitals for LTCH discharges that meet the 

criteria for exclusion from site neutral 

payment rate (that is, LTCH PPS standard 

Federal payment rate cases) based on the 

LTCH PPS standard Federal payment rate, 

which includes HCO payments determined 

under existing § 412.525(a). Furthermore, we 

are proposing that the site neutral payment 

rate is the lower of the IPPS comparable per 

diem amount as determined under 

§ 412.529(d)(4) (including any applicable 

adjustments, such as outlier payments), or 

100 percent of the estimated cost of the case 

as determined under existing § 412.529(d)(2), 

consistent with the statute. 

Under the new statutory dual-rate LTCH 

PPS payment structure, as discussed in 

section VII.B.7.b. of the preamble of this 

proposed rule, we are proposing to establish 

two separate HCO targets—one for LTCH PPS 

standard Federal payment rate cases and one 

for site neutral payment rate cases. We are 

proposing to revise the regulations by making 

the proposed changes to the HCO policy to 

account for the new statutory dual-rate LTCH 

PPS payment structure by revising 

paragraphs (a)(1), (a)(2), and (a)(3), and 

adding a new paragraph (a)(4) to existing 

§ 412.525 of the regulations. Under our 

proposed HCO policy revised in accordance 

with the new statutory LTCH PPS payment 

structure, we are proposing to establish a 

fixed-loss amount and target for LTCH PPS 

standard Federal payment rate cases using 

the current LTCH PPS HCO policy, but 

limiting the data used under that policy to 

LTCH cases that would have been LTCH PPS 

standard Federal payment rate cases if the 

statutory changes had been in effect at the 

time of those discharges. Therefore, we are 

not proposing any modifications to the HCO 

methodology as it applies to LTCH PPS 

standard Federal payment rate cases other 

than determining a fixed-loss amount using 

only data from LTCH PPS standard Federal 

payment rate cases. Specifically, under our 

proposal, LTCH PPS standard Federal 

payment rate cases would receive an 

additional payment for an HCO case that is 

equal to 80 percent of the difference between 

the estimated cost of the case and the HCO 

threshold, which would be the sum of the 

LTCH PPS payment for the LTCH PPS 

standard Federal payment rate case and the 

fixed-loss amount for such cases. The fixedloss amount for LTCH PPS standard Federal 

payment rate cases would continue to be 

determined so that estimated HCO payments 

would be projected to be equal to 8 percent 

of estimated total LTCH PPS payments for 

LTCH PPS standard Federal payment rate 

cases. 

Furthermore, we are proposing to revise 

the HCO policy under existing § 412.525(a) to 

provide for high-cost outlier payments under 

the site neutral payment rate. Specifically, 

we are proposing that site neutral payment 

rate cases would receive an additional 

payment for HCOs that would be equal to 80 

percent of the difference between the 

estimated cost of the case and the HCO 

threshold for site neutral payment rate 

discharges, which we are proposing would be 

the sum of site neutral payment rate for the 

case and the IPPS fixed-loss amount. In 

addition, in order to maintain budget 

neutrality, we are proposing to make the 

HCO payments for site neutral payment rate 

cases budget neutral by applying a proposed 

budget neutrality factor to the LTCH PPS 

payments for those site neutral payment rate 

cases. (Additional details on the proposed 

budget neutrality adjustment for HCO 

payments to site neutral payment rate cases 

is discussed subsequently in section V.D.4. of 

this Addendum.) 

2. Determining LTCH CCRs Under the LTCH 

PPS 

a. Background 

The following is a discussion of CCRs that 

are used in determining payments for HCO 

cases under § 412.525(a), SSO cases paid 

under the LTCH PPS in accordance with 

§ 412.529, and proposed site neutral payment 

rate cases paid in accordance with proposed 

§ 412.522(c) (as discussed in section VII.B.4. 

of the preamble of this proposed rule). 

Although this section is specific to HCO 

cases, because CCRs and the policies and 

methodologies pertaining to them are used in 

determining payments for HCO, SSO, and 

proposed site neutral payment rate cases (to 

determine the estimated costs of these cases), 

we are discussing the determination of CCRs 

under the LTCH PPS for these three types of 

cases simultaneously in this section. 

In determining HCO payments in 

accordance with § 412.525(a), SSO payments 

in accordance with § 412.529 and proposed 

site neutral payment rate payments in 

accordance with proposed § 412.522(c), we 

calculate the estimated cost of the case by 

multiplying the LTCH’s overall CCR by the 

Medicare allowable charges for the case. In 

general, we use the LTCH’s overall CCR, 

which is computed based on either the most 

recently settled cost report or the most recent 

tentatively settled cost report, whichever is 

from the latest cost reporting period, in 

accordance with § 412.525(a)(4)(iv)(B), for 

HCOs, § 412.529(f)(4)(ii) for SSOs, and 

proposed § 412.522(c)(1)(ii) for proposed site 

neutral payment rate cases. (We note that, in 

some instances under the provisions of the 

regulations at § 412.525(a)(4)(iv) and 

§ 412.529(f)(4), and proposed 

§ 412.522(c)(1)(ii), we may use an alternative 

CCR, such as the statewide average CCR, a 

CCR that is specified by CMS, or that is 

requested by the hospital.) Under the LTCH 

PPS, a single prospective payment per 

discharge is made for both inpatient 

operating and capital-related costs. 

Therefore, we compute a single ‘‘overall’’ or 

‘‘total’’ LTCH-specific CCR based on the sum 

of LTCH operating and capital costs (as 

described in Section 150.24, Chapter 3, of the 

Medicare Claims Processing Manual (Pub. 

100–4)) as compared to total charges. 


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Specifically, an LTCH’s CCR is calculated by 

dividing an LTCH’s total Medicare costs (that 

is, the sum of its operating and capital 

inpatient routine and ancillary costs) by its 

total Medicare charges (that is, the sum of its 

operating and capital inpatient routine and 

ancillary charges). 

b. LTCH Total CCR Ceiling 

Generally, an LTCH is assigned the 

applicable statewide average CCR if, among 

other things, an LTCH’s CCR is found to be 

in excess of the applicable maximum CCR 

threshold (that is, the LTCH CCR ceiling). 

This is because CCRs above this threshold are 

most likely due to faulty data reporting or 

entry, and CCRs based on erroneous data 

should not be used to identify and make 

payments for outlier cases. Therefore, under 

our established policy, generally, if an 

LTCH’s calculated CCR is above the 

applicable ceiling, the applicable LTCH PPS 

statewide average CCR is assigned to the 

LTCH instead of the CCR computed from its 

most recent (settled or tentatively settled) 

cost report data. 

In this proposed rule, using our established 

methodology for determining the LTCH total 

CCR ceiling, based on IPPS total CCR data 

from the December 2014 update of the PSF, 

we are proposing to establish a total CCR 

ceiling of 1.345 under the LTCH PPS for FY 

2016 in accordance with 

§ 412.525(a)(4)(iv)(C)(2) for HCOs, 

§ 412.529(f)(4)(iii)(B) for SSOs, and proposed 

§ 412.522(c)(1)(ii) for site neutral payment 

rate cases. We also are proposing that if more 

recent data become available, we would use 

that data to determine the LTCH PPS CCR 

ceiling for the FY 2016 final rule. 

c. LTCH Statewide Average CCRs 

Our general methodology established for 

determining the statewide average CCRs used 

under the LTCH PPS is similar to our 

established methodology for determining the 

LTCH total CCR ceiling (described above) 

because it is based on ‘‘total’’ IPPS CCR data. 

Under the LTCH PPS HCO policy at 

§ 412.525(a)(4)(iv)(C) the SSO policy at 

§ 412.529(f)(4)(iii), and the proposed site 

neutral payment rate policy at proposed 

§ 412.522(c)(1)(ii), the MAC may use a 

statewide average CCR, which is established 

annually by CMS, if it is unable to determine 

an accurate CCR for an LTCH in one of the 

following circumstances: (1) New LTCHs that 

have not yet submitted their first Medicare 

cost report (for this purpose, consistent with 

current policy, a new LTCH is defined as an 

entity that has not accepted assignment of an 

existing hospital’s provider agreement in 

accordance with § 489.18); (2) LTCHs whose 

CCR is in excess of the LTCH CCR ceiling; 

and (3) other LTCHs for whom data with 

which to calculate a CCR are not available 

(for example, missing or faulty data). (Other 

sources of data that the MAC may consider 

in determining an LTCH’s CCR include data 

from a different cost reporting period for the 

LTCH, data from the cost reporting period 

preceding the period in which the hospital 

began to be paid as an LTCH (that is, the 

period of at least 6 months that it was paid 

as a short-term, acute care hospital), or data 

from other comparable LTCHs, such as 

LTCHs in the same chain or in the same 

region.) 

Consistent with our historical practice of 

using the best available data, in this proposed 

rule, using our established methodology for 

determining the LTCH statewide average 

CCRs, based on the most recent complete 

IPPS ‘‘total CCR’’ data from the December 

2014 update of the PSF, we are proposing to 

establish proposed LTCH PPS statewide 

average total CCRs for urban and rural 

hospitals that would be effective for 

discharges occurring on or after October 1, 

2015 through September 30, 2016, in Table 

8C listed in section VI. of the Addendum to 

this proposed rule (and available via the 

Internet). We also are proposing that if more 

recent data become available, we would use 

that data to determine the LTCH PPS 

statewide average total CCRs for FY 2016. 

Under the current LTCH PPS labor market 

areas, all areas in Delaware, the District of 

Columbia, New Jersey, and Rhode Island are 

classified as urban. Therefore, there are no 

rural statewide average total CCRs listed for 

those jurisdictions in Table 8C. This policy 

is consistent with the policy that we 

established when we revised our 

methodology for determining the applicable 

LTCH statewide average CCRs in the FY 2007 

IPPS final rule (71 FR 48119 through 48121) 

and is the same as the policy applied under 

the IPPS. In addition, although Connecticut 

and Massachusetts have areas that are 

designated as rural, there are no short-term, 

acute care IPPS hospitals or LTCHs located 

in those areas as of December 2014. 

Therefore, consistent with our existing 

methodology, we are proposing to use the 

national average total CCR for rural IPPS 

hospitals for rural Connecticut and 

Massachusetts in Table 8C listed in section 

VI. of the Addendum to this proposed rule 

(and available via the Internet). In addition, 

consistent with our existing methodology, in 

determining the urban and rural statewide 

average total CCRs for Maryland LTCHs paid 

under the LTCH PPS, we are proposing to 

continue to use, as a proxy, the national 

average total CCR for urban IPPS hospitals 

and the national average total CCR for rural 

IPPS hospitals, respectively. We are using 

this proxy because we believe that the CCR 

data in the PSF for Maryland hospitals may 

not be entirely accurate (as discussed in 

greater detail in the FY 2007 IPPS final rule 

(71 FR 48120)). 

d. Reconciliation of HCO, SSO, and Proposed 

Site Neutral Payment Rate Payments 

Under the HCO policy at 

§ 412.525(a)(4)(iv)(D), the SSO policy at 

§ 412.529(f)(4)(iv), and as proposed for site 

neutral payment rate cases at proposed 

§ 412.522(c)(4), the payments for HCO, SSO, 

and site neutral payment rate cases are 

subject to reconciliation. Specifically, any 

reconciliation of payments is based on the 

CCR that is calculated based on a ratio of 

cost-to-charge data computed from the 

relevant cost report determined at the time 

the cost report coinciding with the discharge 

is settled. Our proposal to establish a 

reconciliation process for payments made to 

LTCHs for site neutral payment rate cases is 

discussed in section VII.B.4.a. of the 

preamble of this proposed rule. For 

additional information on the existing 

reconciliation policy, we refer readers to 

sections 150.26 through 150.28 of the 

Medicare Claims Processing Manual (Pub. 

100–4) as added by Change Request 7192 

(Transmittal 2111; December 3, 2010) and the 

RY 2009 LTCH PPS final rule (73 FR 26820 

through 26821). 

3. Proposed High-Cost Outlier Payments for 

LTCH PPS Standard Federal Payment Rate 

Cases 

a. Establishment of the Proposed LTCH PPS 

Fixed-Loss Amount for LTCH PPS Standard 

Federal Payment Rate Cases for FY 2016 

When we implemented the LTCH PPS, 

under the broad authority of section 123 of 

the BBRA as amended by section 307(b) of 

BIPA, we established a fixed-loss amount so 

that total estimated outlier payments are 

projected to equal 8 percent of total estimated 

payments under the LTCH PPS (67 FR 56022 

through 56026). To determine the fixed-loss 

amount, we estimate outlier payments and 

total LTCH PPS payments for each case using 

claims data from the MedPAR files. 

Specifically, we estimate the cost of the case 

by multiplying the Medicare covered charges 

from the claim by the LTCH’s CCR. Under the 

HCO policy at § 412.525(a), if the estimated 

cost of the case exceeds the outlier threshold, 

we make an outlier payment equal to 80 

percent of the difference between the 

estimated cost of the case and the outlier 

threshold (that is, the sum of the adjusted 

standard Federal rate payment and the fixedloss amount). 

As noted above and as discussed in greater 

detail in section VII.B.7.b. of the preamble of 

this proposed rule, under the new statutory 

dual-rate LTCH PPS payment structure, we 

are proposing to establish two separate HCO 

targets—one for LTCH PPS standard Federal 

payment rate cases and one for site neutral 

payment rate cases. Under this proposal, for 

LTCH PPS standard Federal payment rate 

cases, we are proposing to establish a fixedloss amount and target using the current 

LTCH PPS HCO policy, but to limit the data 

used under that policy to LTCH cases that 

would have been paid as LTCH PPS standard 

Federal payment rate cases, if that payment 

rate had been in effect at the time of those 

discharges. Therefore, we are not proposing 

to make any modifications to the existing 

LTCH PPS HCO payment methodology as it 

applies to LTCH PPS standard Federal 

payment rate cases, other than determining a 

fixed-loss amount using only data from LTCH 

PPS standard Federal payment rate cases. As 

such, LTCH PPS standard Federal payment 

rate cases would continue to receive an 

additional payment for any HCO case that 

would be equal to 80 percent of the 

difference between the estimated cost of the 

case and the HCO threshold, which would be 

the sum of the LTCH PPS payment for the 

LTCH PPS standard Federal payment rate 

case and the fixed-loss amount. The fixedloss amount for LTCH PPS standard Federal 

payment rate cases would continue to be 

determined so that estimated HCO payments 

would be projected to equal 8 percent of 

estimated total LTCH PPS standard Federal 

payment rate cases, and a budget neutrality 

factor will continue to be applied to LTCH 

PPS standard Federal payment rate cases to 

offset that 8 percent so that HCO payments 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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for LTCH PPS standard Federal payment rate 

cases would be budget neutral. Below we 

present our proposed calculation of the 

proposed LTCH PPS fixed-loss amount for 

LTCH PPS standard Federal payment rate 

cases for FY 2016, which is consistent with 

the methodology used to establish the FY 

2015 LTCH PPS fixed-loss amount. 

(Additional discussion of our HCO payment 

policy proposals for site neutral payment rate 

cases is discussed subsequently in section 

V.D.4. of this Addendum.) 

In the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50399 through 50400), we presented 

our policies regarding the methodology and 

data we used to establish a fixed-loss amount 

of $14,972 for FY 2015, which was calculated 

using our existing methodology (based on the 

data and the rates and policies presented in 

that final rule) in order to maintain estimated 

HCO payments at the projected 8 percent of 

total estimated LTCH PPS payments. 

Consistent with our historical practice of 

using the best data available, in determining 

the fixed-loss amount for FY 2015, we used 

the most recent available LTCH claims data 

and CCR data, that is, LTCH claims data from 

the March 2014 update of the FY 2013 

MedPAR file and CCRs from the March 2014 

update of the PSF, as these data were the 

most recent complete LTCH data available at 

that time. 

In this proposed rule, we are proposing to 

continue to use our existing methodology to 

calculate a fixed-loss amount for LTCH PPS 

standard Federal payment rate cases for FY 

2016 using the best available data that would 

maintain estimated HCO payments at the 

projected 8 percent of total estimated LTCH 

PPS payments for LTCH PPS standard 

Federal payment rate cases (based on the 

proposed rates and policies for these cases 

presented in this proposed rule). Specifically, 

based on the most recent complete LTCH 

data available (that is, LTCH claims data from 

the December 2014 update of the FY 2014 

MedPAR file and CCRs from the December 

2014 update of the PSF), we are proposing to 

determine a fixed-loss amount for LTCH PPS 

standard Federal payment rate cases for FY 

2016 that would result in estimated outlier 

payments projected to be equal to 8 percent 

of total estimated payments for these cases in 

FY 2016. Under the broad authority of 

section 123(a)(1) of the BBRA and section 

307(b)(1) of the BIPA, we are proposing a 

fixed-loss amount of $18,768 for LTCH PPS 

standard Federal payment rate cases for FY 

2016, and also to continue to make an 

additional HCO payment for the cost of an 

LTCH PPS standard Federal payment rate 

case that exceeds the HCO threshold amount 

that is equal to 80 percent of the difference 

between the estimated cost of the case and 

the outlier threshold (the sum of the adjusted 

LTCH PPS standard Federal payment rate 

payment and the proposed fixed-loss amount 

for LTCH PPS standard Federal payment rate 

cases of $18,768). 

We note that the proposed fixed-loss 

amount of $18,768 for LTCH PPS standard 

Federal payment rate cases for FY 2016 is 

higher than the FY 2015 fixed-loss amount of 

$14,792. This increase is largely attributable 

to the implementation of the new statutory 

dual-rate LTCH PPS payment structure, 

under which we have proposed to have 

separate HCO target amounts for LTCH PPS 

standard Federal payment rate cases and site 

neutral payment rate cases. The FY 2015 

fixed-loss amount was determined based data 

from all LTCH cases—both those that would 

have been paid as site neutral payment rate 

cases and those that would have been paid 

as LTCH PPS standard Federal payment rate 

cases if the statutory changes had been in 

effect at that time. However, under our 

proposal, the proposed fixed-loss amount of 

$18,768 for FY 2016 would only be used to 

determine HCO payments made for LTCH 

PPS standard Federal payment rate cases. We 

currently estimate that the FY 2015 fixed-loss 

amount of $14,972 results in estimated HCO 

payments for LTCH PPS standard Federal 

payment rate cases of approximately 8.6 

percent of total estimated FY 2015 LTCH PPS 

payments to those cases, which exceeds the 

8 percent target. Therefore, we believe that it 

is necessary and appropriate to increase the 

fixed-loss amount to maintain that, for LTCH 

PPS standard Federal payment rate cases, 

estimated HCO payments would equal 8 

percent of estimated total LTCH PPS 

payments for those cases as required under 

the proposed revisions to § 412.525(a). (For 

further information on the existing 8 percent 

HCO ‘‘target’’ requirement, we refer readers 

to the August 30, 2002 LTCH PPS final rule 

(67 FR 56022 through 56024).) Maintaining 

the fixed-loss amount at the current level 

would result in HCO payments that are more 

than the current regulatory 8-percent target 

that we are proposing would apply to total 

payments for LTCH PPS standard Federal 

payment rate cases because a lower fixed-loss 

amount would result in more cases 

qualifying as outlier cases, as well as higher 

outlier payments for qualifying HCO cases 

because the maximum loss that an LTCH 

must incur before receiving an HCO payment 

(that is, the fixed-loss amount) would be 

smaller. Consistent with our historical 

practice, we are proposing that if more recent 

data is available, we would use such data to 

calculate the FY 2016 fixed-loss amount for 

LTCH PPS standard Federal payment rate 

cases in the final rule. 

b. Application of the High-Cost Outlier 

Policy to SSO Cases 

Under our proposals to implement the 

dual-rate LTCH PPS payment structure 

required by statute, we are proposing that 

LTCH PPS standard Federal payment rate 

cases (that is, LTCH discharges that meet the 

criteria for exclusion from the site neutral 

payment rate) would continue to be paid 

based on the LTCH PPS standard Federal 

payment rate, and would include all of the 

existing payment adjustments under 

§ 412.525(d), such as the adjustments for SSO 

cases under § 412.529. (For additional 

information on our proposed payments for 

LTCH standard payment rate cases, we refer 

readers to section VII.B.4.c. of the preamble 

of this proposed rule.) Under some rare 

circumstances, an LTCH discharge can 

qualify as an SSO case (as defined in the 

regulations at § 412.529 in conjunction with 

§ 412.503) and also as an HCO case, as 

discussed in the August 30, 2002 final rule 

(67 FR 56026). In this scenario, a patient 

could be hospitalized for less than five-sixths 

of the geometric average length of stay for the 

specific MS–LTC–DRG, and yet incur 

extraordinarily high treatment costs. If the 

estimated costs exceeded the HCO threshold 

(that is, the SSO payment plus the fixed-loss 

amount), the discharge is eligible for 

payment as an HCO. Therefore, for an SSO 

case in FY 2016, the HCO payment would be 

80 percent of the difference between the 

estimated cost of the case and the outlier 

threshold (the sum of the proposed fixed-loss 

amount of $18,768 and the amount paid 

under the SSO policy as specified in 

§ 412.529). 

4. Proposed High-Cost Outlier Payments for 

Site Neutral Payment Rate Cases 

Under the new dual-rate LTCH PPS 

payment structure, the statute establishes two 

distinct payment rates for LTCH discharges 

beginning in FY 2016. Under this statutory 

change, as discussed in section VII.B. of the 

preamble of this proposed rule, we are 

proposing to pay for LTCH discharges that 

meet the criteria for exclusion from the site 

neutral payment rate (that is, LTCH PPS 

standard Federal payment rate cases) based 

on the LTCH PPS standard Federal payment 

rate. In addition, consistent with the statute, 

we are proposing that the site neutral 

payment rate is the lower of the IPPS 

comparable per diem amount as determined 

under § 412.529(d)(4), including any 

applicable outlier payments as specified in 

§ 412.525(a); or 100 percent of the estimated 

cost of the case as determined under existing 

§ 412.529(d)(2). Furthermore, we are 

proposing have two separate HCO targets-one 

for LTCH PPS standard Federal payment rate 

cases and one for site neutral payment rate 

cases. 

For site neutral payment rate cases, we are 

proposing that such cases would receive an 

additional HCO payment for costs that 

exceed the HCO threshold that would be 

equal to 80 percent of the difference between 

the estimated cost of the case and the HCO 

threshold. We are proposing that the HCO 

threshold for site neutral payment rate cases 

would be the sum of the site neutral payment 

rate for the case and the IPPS fixed-loss 

amount. (We note that, as discussed in 

section VII.B.7.b. of the preamble of this 

proposed rule, in light of our HCO proposals 

in accordance with our implementation of 

the new statutory dual-rate LTCH PPS 

payment structure, any site neutral payment 

rate case that is paid 100 percent of the 

estimated cost of the case (because that 

amount is lower than the IPPS comparable 

per diem amount) would not be eligible to 

receive a HCO payment because, by 

definition, the estimated costs of such cases 

would never exceed the IPPS comparable 

amount by any threshold.) Under this 

proposal, we are proposing that HCO 

payments for site neutral payment rate cases 

would be budget neutral, such that the 

proposed site neutral payment rate HCO 

payments would not result in any change in 

estimated aggregate LTCH PPS payments. In 

order to achieve this, under proposed new 

§ 412.522(c)(2)(i), we are proposing to apply 

a budget neutrality factor to the payments for 

all site neutral payment rate cases, which 

would be established on an estimated basis. 

(For additional details on our HCO policy 


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proposals for site neutral payment rate cases, 

we refer readers to section VII.B.7.b. of the 

preamble of this proposed rule.) 

As we discussed in section VII.B.7.b. of the 

preamble of this proposed rule, in order to 

estimate the magnitude a proposed budget 

neutrality adjustment for HCO payments for 

site neutral payment rate cases, we relied on 

the assumption by our actuaries that site 

neutral payment rate cases would have 

lengths of stay and costs comparable to IPPS 

cases assigned to the same MS–DRG. Because 

site neutral payment rate cases are expected 

to have lengths of stay and costs comparable 

to IPPS cases assigned to the same MS DRG, 

we project that our proposal to use the IPPS 

fixed-loss threshold for the site neutral 

payment rate cases would result in HCO 

payments for site neutral payment rate cases 

that are similar in proportion as is seen in 

IPPS cases assigned to the same MS–DRG; 

that is, 5.1 percent. Therefore, under 

proposed new § 412.522(c)(2)(i), we are 

proposing to adjust all payments for site 

neutral payment rate cases by a budget 

neutrality factor so that the estimated HCO 

payments payable for site neutral payment 

rate cases do not result in any increase in 

aggregate LTCH PPS payments. 

The statutory LTCH PPS payment changes 

required by section 1886(m)(6) of the Act 

(that is, the application of the site neutral 

payment rate) are effective for LTCH PPS 

discharges occurring in cost reporting 

periods beginning on or after October 1, 

2015. In this proposed rule, to estimate total 

LTCH PPS site neutral payment rate 

payments in Federal FY 2016, we are 

proposing an adjustment to account for the 

varying effective dates of the statutory dualrate LTCH PPS payment structure. In order 

to estimate FY 2016 LTCH PPS payments 

based on site neutral payment rate cases, it 

is necessary to account for the fact that 

LTCHs whose cost reporting periods begin 

after October 1, 2015, will receive the LTCH 

PPS standard Federal payment rates for all of 

their LTCH PPS cases, including their cases 

that would be site neutral payment rate cases, 

until the start of their next cost reporting 

period. For purposes of estimating site 

neutral payment rate payments in FY 2016, 

we examined LTCHs whose cost reporting 

periods begin in the first quarter of FY 2016 

(that is, October through December 2015). We 

modeled that all of the FY 2016 site neutral 

payment rate cases associated with these 

LTCHs would be paid at the proposed 

transitional blended payment rate (that is, 50 

percent of the applicable site neutral 

payment rate amount for the discharge as 

determined under proposed new 

§ 412.522(c)(1) and 50 percent of the 

applicable LTCH PPS standard Federal 

payment rate determined under § 412.523). 

All of the first quarter FY 2016 site neutral 

payment rate cases for LTCHs whose cost 

reporting periods begin after the start of the 

first quarter of FY 2016 were modeled as 

being paid at the LTCH PPS standard Federal 

payment rate for all discharges in that 

quarter. We then examined LTCHs whose 

cost reporting periods begin in the second 

quarter of FY 2016 (that is, January through 

March 2016). We modeled that all of the 

second, third, and fourth quarter FY 2016 site 

neutral payment rate cases associated with 

these LTCHs would be paid at the 

transitional blended payment rate. All of the 

second quarter FY 2016 site neutral payment 

rate cases for LTCHs whose cost reporting 

periods begin after the start of the second 

quarter of FY 2016 were modeled as being 

paid at the LTCH PPS standard Federal 

payment rate for all discharges in that 

quarter. Similarly, we examined LTCHs 

whose cost reporting periods begin in the 

third quarter of FY 2016 (that is, April 

through June 2016). We modeled that all of 

the third and fourth quarter FY 2016 site 

neutral payment rate cases associated with 

these LTCHs would be paid at the 

transitional blended payment rate. For all of 

the third quarter FY 2016 site neutral 

payment rate cases for LTCHs whose cost 

reporting periods begin after the start of the 

third quarter of FY 2016, we modeled as 

being paid at the LTCH PPS standard Federal 

payment rate. Finally, we examined LTCHs 

whose cost reporting periods begin in the 

fourth quarter of FY 2016 (that is, July 

through September of 2016). We modeled all 

of the fourth quarter FY 2016 site neutral 

payment rate cases associated with these 

LTCHs as being paid at the transitional 

blended payment rate. We believe that this 

approach is reasonable for the purpose of 

taking into account in our FY 2016 payment 

estimates given the fact that LTCHs whose 

cost reporting periods begin after October 1, 

2015 will receive the LTCH PPS standard 

Federal payment rate as payment for all of 

their LTCH PPS cases, including their cases 

that would be categorized as site neutral 

payment rate cases, until the start of their 

next cost reporting period. Based on the 

fiscal year start dates recorded in the 

December update of the Provider Specific 

File, of the 418 LTCHs in our database of 

LTCH claims from the December 2014 update 

of the FY 2014 MedPAR files used for this 

proposed rule, the following percentages 

apply in the approach described above: 10.85 

percent of site neutral payment rate cases are 

from LTCHs whose cost reporting periods 

begin in the first quarter of FY 2016; 31.41 

percent of site neutral payment rate cases are 

from LTCHs whose cost reporting periods 

begin in the second quarter of FY 2016; 10.83 

percent of site neutral payment rate cases are 

from LTCHs whose cost reporting periods 

begin in the third quarter of FY 2016; and 

46.91 percent of site neutral payment rate 

cases are from LTCHs whose cost reporting 

periods begin in the fourth quarter of FY 

2016. 

Using the approach described above to 

account for when LTCHs’ first cost reporting 

period begins on or after October 1, 2015, and 

based on the applicable LTCH claims in our 

database from the December 2014 update of 

the FY 2014 MedPAR files, we estimate that 

site neutral payment rate HCO payments 

would be approximately 2.3 percent of total 

LTCH PPS payments for site neutral payment 

rate cases in FY 2016. Therefore, we are 

proposing to apply a budget neutrality factor 

of 0.976996 to all payments for site neutral 

payment rate cases in FY 2016 so that the 

estimated HCO payments payable to those 

cases do not result any increase in aggregate 

LTCH PPS payments, in accordance with 

proposed new § 412.522(c)(2)(i). 

E. Proposed Update to the IPPS Comparable/ 

Equivalent Amounts To Reflect the Statutory 

Changes to the IPPS DSH Payment 

Adjustment Methodology 

In the FY 2014 IPPS/LTCH PPS final rule, 

we established a policy for reflecting the 

changes to the Medicare IPPS DSH payment 

adjustment methodology provided for by 

section 3133 of the Affordable Care Act in the 

calculation of the ‘‘IPPS comparable amount’’ 

under the SSO policy at § 412.529 and the 

‘‘IPPS equivalent amount’’ under the 25- 

percent threshold payment adjustment policy 

at § 412.534 and § 412.536. Historically, the 

determination of both the ‘‘IPPS comparable 

amount’’ and the ‘‘IPPS equivalent amount’’ 

includes an amount for inpatient operating 

costs ‘‘for the costs of serving a 

disproportionate share of low-income 

patients.’’ Under the statutory changes to the 

Medicare DSH payment adjustment 

methodology that began in FY 2014, in 

general, eligible IPPS hospitals receive an 

empirically justified Medicare DSH payment 

equal to 25 percent of the amount they 

otherwise would have received under the 

statutory formula for Medicare DSH 

payments prior to the amendments made by 

the Affordable Care Act. The remaining 

amount, equal to an estimate of 75 percent 

of the amount that otherwise would have 

been paid as Medicare DSH payments, 

reduced to reflect changes in the percentage 

of individuals under the age of 65 who are 

uninsured, is made available to make 

additional payments to each hospital that 

qualifies for Medicare DSH payments and 

that has uncompensated care. The additional 

uncompensated care payments are based on 

the hospital’s amount of uncompensated care 

for a given time period relative to the total 

amount of uncompensated care for that same 

time period reported by all IPPS hospitals 

that receive Medicare DSH payments. 

To reflect the statutory changes to the 

Medicare DSH payment adjustment 

methodology in the calculation of the ‘‘IPPS 

comparable amount’’ and the ‘‘IPPS 

equivalent amount’’ under the LTCH PPS, we 

stated that we will include a reduced 

Medicare DSH payment amount that reflects 

the projected percentage of the payment 

amount calculated based on the statutory 

Medicare DSH payment formula prior to the 

amendments made by the Affordable Care 

Act that will be paid to eligible IPPS 

hospitals as empirically justified Medicare 

DSH payments and uncompensated care 

payments in that year (that is, a percentage 

of the operating DSH payment amount that 

has historically been reflected in the LTCH 

PPS payments that is based on IPPS rates). 

We also stated that the projected percentage 

will be updated annually, consistent with the 

annual determination of the amount of 

uncompensated care payments that will be 

made to eligible IPPS hospitals. As explained 

in the FY 2014 IPPS/LTCH PPS final rule (79 

FR 50766 through 50767), we believe that 

this approach results in appropriate 

payments under the LTCH PPS and is 

consistent with our intention that the ‘‘IPPS 

comparable amount’’ and the ‘‘IPPS 

equivalent amount’’ under the LTCH PPS 

closely resemble what an IPPS payment 

would have been for the same episode of 


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care, while recognizing that some features of 

the IPPS cannot be translated directly into 

the LTCH PPS. 

In the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50400 through 50401), we discussed 

that, for FY 2015, based on the latest data 

available at that time, we projected that the 

reduction in the amount of Medicare DSH 

payments pursuant to section 1886(r)(1) of 

the Act, along with the proposed payments 

for uncompensated care under section 

1886(r)(2) of the Act, would result in overall 

Medicare DSH payments equaling 85.26 

percent of the amount of Medicare DSH 

payments that would otherwise have been 

made in the absence of amendments made by 

the Affordable Care Act. Therefore, the 

calculation of the ‘‘IPPS comparable amount’’ 

under § 412.529 and the ‘‘IPPS equivalent 

amount’’ under § 412.534 and § 412.536 for 

FY 2015 includes an applicable operating 

Medicare DSH payment amount that would 

be equal to 85.26 percent of the operating 

Medicare DSH payment amount based on the 

statutory Medicare DSH payment formula 

prior to the amendments made by the 

Affordable Care Act. 

For FY 2016, as discussed in greater detail 

in section IV.D.3.d.(2) of the preamble of this 

proposed rule, based on the most recent data 

available, our estimate of 75 percent of the 

amount that would otherwise have been paid 

as Medicare DSH payments (under the 

methodology outlined in section 1886(r)(2) of 

the Act) would be adjusted to 63.69 percent 

of that amount to reflect the change in the 

percentage of individuals who are uninsured. 

The resulting amount would then be used to 

determine the amount of uncompensated 

care payments that will be made to eligible 

IPPS hospitals in FY 2016. In other words, 

Medicare DSH payments prior to the 

amendments made by the Affordable Care 

Act would be adjusted to 47.77 percent (the 

product of 75 percent and 63.69 percent) and 

the resulting amount would be used to 

calculate the uncompensated care payments 

to eligible hospitals. As a result, for FY 2016, 

we project that the reduction in the amount 

of Medicare DSH payments pursuant to 

section 1886(r)(1) of the Act, along with the 

payments for uncompensated care under 

section 1886(r)(2) of the Act, would result in 

overall Medicare DSH payments of 72.77 

percent of the amount of Medicare DSH 

payments that would otherwise have been 

made in the absence of amendments made by 

the Affordable Care Act (that is, 25 percent 

+ 47.77 percent = 72.77 percent). 

We also are proposing that, consistent with 

our historical practice of using the most 

recent data available, if more recent data 

become available for the final rule, we would 

use such data to determine the percentage of 

the operating Medicare DSH payment 

amount based on the statutory Medicare DSH 

payment formula prior to the amendments 

made by the Affordable Care Act used in the 

calculation of the ‘‘IPPS comparable amount’’ 

under § 412.529 and the ‘‘IPPS equivalent 

amount’’ under § 412.534 and § 412.536 for 

FY 2016. In this proposed rule, for FY 2016, 

we are proposing to establish that the 

calculation of the ‘‘IPPS comparable amount’’ 

under § 412.529 and the ‘‘IPPS equivalent 

amount’’ under § 412.534 and § 412.536 

would include an applicable operating 

Medicare DSH payment amount that will be 

equal to 72.77 percent of the operating 

Medicare DSH payment amount based on the 

statutory Medicare DSH payment formula 

prior to the amendments made by the 

Affordable Care Act. 

F. Computing the Proposed Adjusted LTCH 

PPS Federal Prospective Payments for FY 

2016 

Section 412.525 sets forth the adjustments 

to the LTCH PPS standard Federal rate. 

Under the new statutory dual-rate LTCH PPS 

payment structure that begins in FY 2016, 

only LTCH PPS cases that meet the statutory 

criteria to be excluded from the site neutral 

payment rate would be paid based on the 

LTCH PPS standard Federal payment rate (as 

discussed in section VII.B. of the preamble of 

this proposed rule). Under § 412.525(c), the 

proposed LTCH PPS standard Federal rate is 

adjusted to account for differences in area 

wages by multiplying the proposed laborrelated share of the LTCH PPS standard 

Federal payment for a case by the applicable 

LTCH PPS wage index (FY 2016 values are 

shown in Tables 12A through 12B listed in 

section VI. of the Addendum of this proposed 

rule and are available via the Internet). The 

proposed LTCH PPS standard Federal 

payment is also adjusted to account for the 

higher costs of LTCHs located in Alaska and 

Hawaii by the applicable COLA factors (the 

proposed FY 2016 factors are shown in the 

chart in section V.D. of this Addendum) in 

accordance with § 412.525(b). In this 

proposed rule, we are proposing to establish 

an LTCH PPS standard Federal payment rate 

for FY 2016 of $41,883.93, as discussed in 

section V.A.2. of the Addendum to this 

proposed rule. We illustrate the methodology 

to adjust the proposed LTCH PPS standard 

Federal rate for FY 2016 in the following 

example: 

Example: During FY 2016, a Medicare 

discharge that meets the criteria to be 

excluded from the site neutral payment rate, 

that is an LTCH PPS standard Federal 

payment rate case, is from an LTCH that is 

located in Chicago, Illinois (CBSA 16974). 

The proposed FY 2016 LTCH PPS wage 

index value for CBSA 16974 is 1.0295 

(obtained from Table 12A listed in section VI. 

of the Addendum of this proposed rule and 

available via the Internet on the CMS Web 

site). The Medicare patient case is classified 

into MS–LTC–DRG 189 (Pulmonary Edema & 

Respiratory Failure), which has a proposed 

relative weight for FY 2016 of 0.9071 

(obtained from Table 11 listed in section VI. 

of the Addendum of this proposed rule and 

available via the Internet on the CMS Web 

site). The LTCH submitted quality reporting 

data for FY 2016 in accordance with the 

LTCHQRP under section 1886(m)(5) of the 

Act. 

To calculate the LTCH’s total adjusted 

Federal prospective payment for this 

Medicare patient case in FY 2016, we 

computed the wage-adjusted proposed 

Federal prospective payment amount by 

multiplying the unadjusted proposed FY 

2016 LTCH PPS standard Federal payment 

rate ($41,883.93) by the proposed laborrelated share (62.2 percent) and the proposed 

wage index value (1.0295). This wageadjusted amount was then added to the 

proposed nonlabor-related portion of the 

unadjusted proposed LTCH PPS standard 

Federal payment rate (37.8 percent; adjusted 

for cost of living, if applicable) to determine 

the adjusted proposed LTCH PPS standard 

Federal payment rate, which is then 

multiplied by the proposed MS–LTC–DRG 

relative weight (0.9071) to calculate the total 

adjusted proposed LTCH PPS standard 

Federal prospective payment for FY 2016 

($38,690.05). The table below illustrates the 

components of the calculations in this 

example. 

Proposed LTCH PPS Standard Federal Prospective 

Payment Rate ................... $41,883.93 

Proposed Labor-Related 

Share ................................. × 0.622 

Proposed Labor-Related Portion of the LTCH PPS 

Standard Federal Payment 

Rate ................................... = $26,051.80 

Proposed Wage Index 

(CBSA 16974) ................... × 1.0295 

Proposed Wage-Adjusted 

Labor Share of LTCH PPS 

Standard Federal Payment 

Rate ................................... = $26,820.33 

Proposed Nonlabor-Related 

Portion of the LTCH PPS 

Standard Federal Payment 

Rate ($41,883.93 × 0.378) + $15,832.13 

Adjusted Proposed LTCH 

PPS Standard Federal 

Payment Amount .............. = $42,652.46 

MS–LTC–DRG 189 Proposed Relative Weight ...... × 0.9071 

Total Adjusted Proposed 

LTCH PPS Standard Federal Prospective Payment = $38,690.05 

VI. Tables Referenced in This Proposed Rule 

and Available Only Through the Internet on 

the CMS Web Site 

This section lists the tables referred to 

throughout the preamble of this proposed 

rule and in this Addendum. In the past, a 

majority of these tables were published in the 

Federal Register as part of the annual 

proposed and final rules. However, similar to 

FYs 2012 through 2015, for the FY 2016 

rulemaking cycle, the IPPS and LTCH tables 

will not be published in the Federal Register 

in the annual IPPS/LTCH PPS proposed and 

final rules and will be available only through 

the Internet. Specifically, all IPPS tables 

listed below, with the exception of IPPS 

Tables 1A, 1B, 1C, and 1D, and LTCH PPS 

Table 1E will be available only through the 

Internet. IPPS Tables 1A, 1B, 1C, and 1D, and 

LTCH PPS Table 1E are displayed at the end 

of this section and will continue to be 

published in the Federal Register as part of 

the annual proposed and final rules. 

As discussed in section III. I. of the 

preamble to this proposed rule, we are 

proposing to streamline and consolidate the 

wage index tables for FY 2016 and 

subsequent fiscal years. In previous fiscal 

years, the wage index tables have consisted 

of the following 12 tables: Table 2 (acute care 

hospitals’ case-mix indexes; hospital wage 

indexes; hospital average hourly wages, and 


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3-year average of hospital average hourly 

wages); Table 3A (relevant fiscal year and 3- 

year average hourly wage for acute care 

hospitals in urban areas by CBSA); Table 3B 

(relevant fiscal year and 3-year average 

hourly wage for acute care hospitals in rural 

areas by CBSA); Table 4A (wage index and 

capital geographic adjustment factor (GAF) 

for acute care hospitals in urban areas by 

CBSA and by State); Table 4B (wage index 

and capital GAF for acute care hospitals in 

rural areas by CBSA and by State); Table 4C 

(wage index and capital GAF for acute care 

hospitals that are reclassified by CBSA and 

by State); Table 4D (States designated as 

frontier, with acute care hospitals receiving 

at a minimum the frontier State floor wage 

index; urban areas with acute care hospitals 

receiving the statewide rural floor or imputed 

rural floor wage index); Table 4E (urban 

CBSAs and constituent counties for acute 

care hospitals); Table 4F (Puerto Rico wage 

index and capital GAF for acute care 

hospitals by CBSA); Table 4J (out-migration 

adjustment for acute care hospitals); Table 

9A (hospital reclassifications and 

redesignations); and Table 9C (hospitals 

redesignated as rural under section 

1886(d)(8)(e) of the Act). With the exception 

of Table 4E, we are proposing to consolidate 

the information from the 11 other tables 

listed above into 2 new tables. The wage 

index tables provided in previous fiscal years 

either display information by CMS 

Certification Number (CCN) or by CBSA 

number. The new Table 2 contains 

information by CCN and information from 

the following tables that have been provided 

in previous fiscal years: Tables 2, 4J, 9A, and 

9C. The new Table 3 contains information by 

CBSA and information from the following 

tables that have been provided in previous 

fiscal years: Tables 3A, 3B, 4A, 4B, 4C, 4D, 

and 4F. We believe these two new tables will 

be easier for the public to navigate and find 

all the relevant data and information from the 

tables provided in previous fiscal years. 

Finally, in previous fiscal years, Table 4E 

provided a list of urban CBSAs and 

constituent counties. Because of formatting 

technicalities, we found it difficult to 

consolidate the information from Table 4E 

into the proposed two new tables. Therefore, 

we are proposing to provide the data 

previously published as Table 4E for each 

annual proposed and final rule as one of our 

data files on our Web page (the same Web 

page where the county to CBSA crosswalk is 

posted). 

As discussed in sections II.G.3.e., II.G.10.a., 

II.G.11., and II.G.13. of the preamble of this 

proposed rule, we developed the following 

ICD–10–CM and ICD–10–PCS code tables for 

FY 2016: Table 6B—New Procedure Codes; 

Table 6I—Complete MCC List; Table 6J— 

Complete CC List; Table 6K—Complete List 

of CC Exclusions; Table 6L—Principal 

Diagnosis Is Its Own MCC List; Table 6M— 

Principal Diagnosis Is Its Own CC List; Table 

6M.1—Additions to the Principal Diagnosis 

Is Its Own CC List; and Table 6P—ICD–10– 

PCS Code Translations for Proposed MS– 

DRG Changes. Table 6P contains multiple 

tables 6P.1a through 6P.2a that list the ICD– 

10–PCS code translations relating to specific 

MS–DRG proposals. In addition, under the 

HAC Reduction Program established by 

section 3008 of the Affordable Care Act, a 

hospital’s total payment may be reduced by 

1 percent if it is in the lowest HAC 

performance quartile. However, as discussed 

in section IV.G. of the preamble of this 

proposed rule, we are not providing the 

hospital-level data as a table associated with 

this proposed rule. The hospital-level data 

for the FY 2016 HAC Reduction Program will 

be made publicly available once it has 

undergone the review and corrections 

process. 

Finally, a hospital’s Factor 3 is the 

proportion of the uncompensated care 

amount that a DSH eligible hospital will 

receive under section 3133 of the Affordable 

Care Act. Factor 3 is the hospital’s estimated 

number of Medicaid days and Medicare SSI 

days relative to the estimate of all DSH 

hospitals’ Medicaid days and Medicare SSI 

days. Table 18 associated with this proposed 

rule contains the FY 2016 Medicare DSH 

uncompensated care payment Factor 3 for all 

hospitals and identifies whether or not a 

hospital is projected to receive DSH and, 

therefore, eligible to receive the additional 

payment for uncompensated care for FY 

2016. 

Readers who experience any problems 

accessing any of the tables that are posted on 

the CMS Web sites identified below should 

contact Michael Treitel at (410) 786–4552. 

The following IPPS tables for this FY 2016 

proposed rule are available only through the 

Internet on the CMS Web site at: http://

www.cms.gov/Medicare/Medicare-Fee-forService-Payment/AcuteInpatientPPS/

index.html. Click on the link on the left side 

of the screen titled, ‘‘FY 2016 IPPS Proposed 

Rule Home Page’’ or ‘‘Acute Inpatient—Files 

for Download’’. 

Table 2.—Proposed Case-Mix Index and 

Wage Index Table by CCN—FY 2016 

Table 3.—Proposed Wage Index Table by 

CBSA—FY 2016 

Table 5.—Proposed List of Medicare Severity 

Diagnosis-Related Groups (MS–DRGs), 

Relative Weighting Factors, and Geometric 

and Arithmetic Mean Length of Stay—FY 

2016 

Table 6B.—New Procedure Codes—FY 2016 

Table 6I.—Proposed Complete Major CC 

List—FY 2016 

Table 6J.—Proposed Complete CC List—FY 

2016 

Table 6K.—Proposed Complete List of CC 

Exclusions—FY 2016 

Table 6L.—Proposed Principal Diagnosis Is 

Its Own MCC List—FY 2016 

Table 6M.—Proposed Principal Diagnosis Is 

Its Own CC List—FY 2016 

Table 6M.1.—Proposed Additions to the 

Principal Diagnosis Is Its Own CC List—FY 

2016 

Table 6P.—ICD–10–PCS Code Translations 

for Proposed MS–DRG Changes—FY 2016 

Table 7A.—Medicare Prospective Payment 

System Selected Percentile Lengths of Stay: 

FY 2014 MedPAR Update—December 2014 

GROUPER V32.0 MS–DRGs 

Table 7B.—Medicare Prospective Payment 

System Selected Percentile Lengths of Stay: 

FY 2014 MedPAR Update—December 2014 

GROUPER V33.0 MS–DRGs 

Table 8A.—Proposed FY 2016 Statewide 

Average Operating Cost-to-Charge Ratios 

(CCRs) for Acute Care Hospitals (Urban 

and Rural) 

Table 8B.—Proposed FY 2016 Statewide 

Average Capital Cost-to-Charge Ratios 

(CCRs) for Acute Care Hospitals. 

Table 10.—Proposed New Technology AddOn Payment Thresholds for Applications 

for FY 2017 

Table 15.—Proposed FY 2016 Proxy 

Readmissions Adjustment Factors 

Table 16.—Proposed Proxy Hospital 

Inpatient Value-Based Purchasing (VBP) 

Program Adjustment Factors for FY 2016 

Table 18.—Proposed FY 2016 Medicare DSH 

Uncompensated Care Payment Factor 3 

The following LTCH PPS tables for this FY 

2016 proposed rule are available only 

through the Internet on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/

LongTermCareHospitalPPS/index.html under 

the list item for Regulation Number CMS– 

1632–P: 

Table 8C.—Proposed FY 2016 Statewide 

Average Total Cost-to-Charge Ratios (CCRs) 

for LTCHs (Urban and Rural) 

Table 11.—Proposed MS–LTC–DRGs, 

Relative Weights, Geometric Average 

Length of Stay, Short-Stay Outlier (SSO) 

Threshold, and ‘‘IPPS Comparable 

Threshold’’ for LTCH PPS Discharges 

Occurring from October 1, 2015 through 

September 30, 2016 

Table 12A.—Proposed LTCH PPS Wage 

Index for Urban Areas for Discharges 

Occurring From October 1, 2015 through 

September 30, 2016 

Table 12B.—Proposed LTCH PPS Wage Index 

for Rural Areas for Discharges Occurring 

from October 1, 2015 through September 

30, 2016 

Table 13A.—Proposed Composition of LowVolume Quintiles for MS–LTC–DRGs—FY 

2016 

Table 13B.—Proposed No-Volume MS–LTC– 

DRG Crosswalk for FY 2016 


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TABLE 1A—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (69.6 PERCENT

LABOR SHARE/30.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2016 

Hospital submitted quality data and is a 

meaningful EHR user 

(update = 1.9 percent) 

Hospital did NOT submit quality 

data and is a meaningful EHR 

user 

(update = 1.225 percent) 

Hospital submitted quality data 

and is NOT a meaningful EHR 

user 

(update = 0.55 percent) 

Hospital did NOT submit quality data and is NOT a meaningful EHR user 

(update = ¥0.125 percent) 

Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor 

$3,813.40 ..................... $1,665.63 $3,788.14 $1,654.60 $3,762.88 $1,643.56 $3,737.62 $1,632.53 

TABLE 1B—PROPOSED NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT

LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2016 

Hospital submitted quality data and is a 

meaningful EHR user (update = 1.9 percent) 

Hospital did not submit quality 

data and is a meaningful EHR 

user (update = 1.225 percent) 

Hospital submitted quality data 

and is not a meaningful EHR 

user (update = 0.55 percent) 

Hospital did not submit quality 

data and is not a meaningful 

EHR user (update = ¥0.125 

percent) 

Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor 

$3,397.00 ..................... $2,082.03 $3,374.50 $2,068.24 $3,351.99 $2,054.45 $3,329.49 $2,040.66 

TABLE 1C—PROPOSED ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR

EQUAL TO 1; PUERTO RICO: 63.2 PERCENT LABOR SHARE/36.8 PERCENT NONLABOR SHARE IF WAGE INDEX IS

GREATER THAN 1 OR 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR

EQUAL TO 1—FY 2016 

Standardized amount 

Rates if wage index is greater 

than 1 

Rates if wage index is less 

than or equal to 1 

Labor Nonlabor Labor Nonlabor 

National 1 .......................................................................................................... NA NA $3,397.00 $2,082.03 

Puerto Rico ...................................................................................................... $1,638.15 $953.86 1,607.05 984.96 

1For FY 2016, there are no CBSAs in Puerto Rico with a national wage index greater than 1. 

TABLE 1D—PROPOSED CAPITAL STANDARD FEDERAL PAYMENT RATES—FY 2016 

Rate 

National ................................................................................................................................................................................................ $468.51 

Puerto Rico .......................................................................................................................................................................................... 230.93 

TABLE 1E— PROPOSED LTCH PPS STANDARD FEDERAL RATE—FY 2016 

Full update 

(1.9 percent) 

Reduced update * 

(¥0.1 percent) 

Standard Federal Rate ............................................................................................................................................ $41,883.93 $41,061.87 

* For LTCHs that fail to submit quality reporting data for FY 2016 in accordance with the LTCH Quality Reporting Program (LTCHQRP), the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. 

Appendix A: Economic Analyses 

I. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

proposed rule as required by Executive Order 

12866 on Regulatory Planning and Review 

(September 30, 1993), Executive Order 13563 

on Improving Regulation and Regulatory 

Review (February 2, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 1980, 

Pub. L. 96–354), section 1102(b) of the Social 

Security Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 22, 

1995, Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 direct 

agencies to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and equity). 

Executive Order 13563 emphasizes the 

importance of quantifying both costs and 

benefits, of reducing costs, of harmonizing 

rules, and of promoting flexibility. A 

regulatory impact analysis (RIA) must be 

prepared for major rules with economically 

significant effects ($100 million or more in 

any 1 year). 

We have determined that this proposed 

rule is a major rule as defined in 5 U.S.C. 

804(2). We estimate that the proposed 

changes for FY 2016 acute care hospital 

operating and capital payments will 

redistribute amounts in excess of $100 

million to acute care hospitals. The 

applicable percentage increase to the IPPS 

rates required by the statute, in conjunction 

with other proposed payment changes in this 

proposed rule, would result in an estimated 


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$278 million increase in proposed FY 2016 

operating payments (or 0.3 percent change) 

and an estimated $160 million increase in 

proposed FY 2016 capital payments (or 2.0 

percent change). These proposed changes are 

relative to payments made in FY 2015. The 

impact analysis of the proposed capital 

payments can be found in section I.I. of this 

Appendix. In addition, as described in 

section I.J. of this Appendix, LTCHs are 

expected to experience a decrease in 

payments by $250 million in FY 2016 

relative to FY 2015. 

Our operating impact estimate includes the 

proposed ¥0.8 percent documentation and 

coding adjustment applied to the IPPS 

standardized amount, which represents part 

of the recoupment required under section 

631 of the ATRA. In addition, our operating 

payment impact estimate includes the 

proposed 1.9 percent hospital update to the 

standardized amount (which includes the 

estimated 2.7 percent market basket update 

less 0.6 percentage point for the proposed 

multifactor productivity adjustment and less 

0.2 percentage point required under the 

Affordable Care Act). The estimates of 

proposed IPPS operating payments to acute 

care hospitals do not reflect any changes in 

hospital admissions or real case-mix 

intensity, which will also affect overall 

proposed payment changes. 

The analysis in this Appendix, in 

conjunction with the remainder of this 

document, demonstrates that this proposed 

rule is consistent with the regulatory 

philosophy and principles identified in 

Executive Orders 12866 and 13563, the RFA, 

and section 1102(b) of the Act. This proposed 

rule would affect payments to a substantial 

number of small rural hospitals, as well as 

other classes of hospitals, and the effects on 

some hospitals may be significant. Finally, in 

accordance with the provisions of Executive 

Order 12866, the Executive Office of 

Management and Budget has reviewed this 

proposed rule. 

B. Statement of Need 

This proposed rule is necessary in order to 

make payment and policy changes under the 

Medicare IPPS for Medicare acute care 

hospital inpatient services for operating and 

capital-related costs as well as for certain 

hospitals and hospital units excluded from 

the IPPS. This proposed rule also is 

necessary to make payment and policy 

changes for Medicare hospitals under the 

LTCH PPS payment system. 

C. Objectives of the IPPS 

The primary objective of the IPPS is to 

create incentives for hospitals to operate 

efficiently and minimize unnecessary costs 

while at the same time ensuring that 

payments are sufficient to adequately 

compensate hospitals for their legitimate 

costs in delivering necessary care to 

Medicare beneficiaries. In addition, we share 

national goals of preserving the Medicare 

Hospital Insurance Trust Fund. 

We believe that the changes in this 

proposed rule would further each of these 

goals while maintaining the financial 

viability of the hospital industry and 

ensuring access to high quality health care 

for Medicare beneficiaries. We expect that 

these proposed changes will ensure that the 

outcomes of the prospective payment 

systems are reasonable and equitable while 

avoiding or minimizing unintended adverse 

consequences. 

D. Limitations of Our Analysis 

The following quantitative analysis 

presents the projected effects of our proposed 

policy changes, as well as statutory changes 

effective for FY 2016, on various hospital 

groups. We estimate the effects of individual 

proposed policy changes by estimating 

payments per case while holding all other 

payment policies constant. We use the best 

data available, but, generally, we do not 

attempt to make adjustments for future 

changes in such variables as admissions, 

lengths of stay, or case-mix. 

E. Hospitals Included In and Excluded From 

the IPPS 

The prospective payment systems for 

hospital inpatient operating and capitalrelated costs of acute care hospitals 

encompass most general short-term, acute 

care hospitals that participate in the 

Medicare program. There were 32 Indian 

Health Service hospitals in our database, 

which we excluded from the analysis due to 

the special characteristics of the prospective 

payment methodology for these hospitals. 

Among other short-term, acute care hospitals, 

hospitals in Maryland are paid in accordance 

with the Maryland All-Payer Model, and 

hospitals located outside the 50 States, the 

District of Columbia, and Puerto Rico (that is, 

5 short-term acute care hospitals located in 

the U.S. Virgin Islands, Guam, the Northern 

Mariana Islands, and American Samoa) 

receive payment for inpatient hospital 

services they furnish on the basis of 

reasonable costs, subject to a rate-of-increase 

ceiling. 

As of March 2015, there were 3,366 IPPS 

acute care hospitals included in our analysis. 

This represents approximately 56 percent of 

all Medicare-participating hospitals. The 

majority of this impact analysis focuses on 

this set of hospitals. There also are 

approximately 1,329 CAHs. These small, 

limited service hospitals are paid on the basis 

of reasonable costs rather than under the 

IPPS. IPPS-excluded hospitals and units, 

which are paid under separate payment 

systems, include IPFs, IRFs, LTCHs, RNHCIs, 

children’s hospitals, 11 cancer hospitals, and 

5 short-term acute care hospitals located in 

the Virgin Islands, Guam, the Northern 

Mariana Islands, and American Samoa. 

Changes in the prospective payment systems 

for IPFs and IRFs are made through separate 

rulemaking. Payment impacts for these IPPSexcluded hospitals and units are not 

included in this proposed rule. The impact 

of the proposed update and proposed policy 

changes to the LTCH PPS for FY 2016 is 

discussed in section I.J. of this Appendix. 

F. Effects on Hospitals and Hospital Units 

Excluded From the IPPS 

As of March 2015, there were 99 children’s 

hospitals, 11 cancer hospitals, 5 short-term 

acute care hospitals located in the Virgin 

Islands, Guam, the Northern Mariana Islands 

and American Samoa, and 18 RNHCIs being 

paid on a reasonable cost basis subject to the 

rate-of-increase ceiling under § 413.40. (In 

accordance with § 403.752(a) of the 

regulation, RNHCIs are paid under § 413.40.) 

Among the remaining providers, 248 

rehabilitation hospitals and 884 

rehabilitation units, and approximately 430 

LTCHs, are paid the Federal prospective per 

discharge rate under the IRF PPS and the 

LTCH PPS, respectively, and 495 psychiatric 

hospitals and 1,122 psychiatric units are paid 

the Federal per diem amount under the IPF 

PPS. As stated above, IRFs and IPFs are not 

affected by the rate updates discussed in this 

proposed rule. The impacts of the proposed 

changes on LTCHs are discussed in section 

I.J. of this Appendix. 

For children’s hospitals, the 11 cancer 

hospitals, the 5 short-term acute care 

hospitals located in the Virgin Islands, Guam, 

the Northern Mariana Islands, and American 

Samoa, and RNHCIs, the update of the rateof-increase limit (or target amount) is the 

estimated FY 2016 percentage increase in the 

IPPS operating market basket, consistent with 

section 1886(b)(3)(B)(ii) of the Act, and 

§§ 403.752(a) and 413.40 of the regulations. 

As discussed in section IV. of the preamble 

of the FY 2014 IPPS/LTCH PPS final rule, we 

rebased the IPPS operating market basket to 

a FY 2010 base year. Therefore, we are using 

the percentage increase in the FY 2010-based 

IPPS operating market basket to update the 

target amounts for FY 2016 and subsequent 

fiscal years for children’s hospitals, the 11 

cancer hospitals, the 5 short-term acute care 

hospitals located in the Virgin Islands, Guam, 

the Northern Mariana Islands, and American 

Samoa, and RNHCIs that are paid based on 

reasonable costs subject to the rate-ofincrease limits. Consistent with current law, 

based on IHS Global Insight, Inc.’s first 

quarter 2015 forecast of the FY 2010-based 

market basket increase, we are estimating 

that the FY 2016 update based on the IPPS 

operating market basket is 2.7 percent (that 

is, the current estimate of the market basket 

rate-of-increase). However, the Affordable 

Care Act requires an adjustment for 

multifactor productivity (currently estimated 

to be 0.6 percentage point for FY 2016) and 

a 0.2 percentage point reduction to the 

market basket update resulting in a proposed 

1.9 percent applicable percentage increase for 

IPPS hospitals that submit quality data and 

are meaningful EHR users, as discussed in 

section IV.A. of the preamble of this 

proposed rule. Children’s hospitals, the 11 

cancer hospitals, the 5 short-term acute care 

hospitals located in the Virgin Islands, Guam, 

the Northern Mariana Islands, and American 

Samoa, and RNCHIs that continue to be paid 

based on reasonable costs subject to rate-ofincrease limits under § 413.40 of the 

regulations are not subject to the reductions 

in the applicable percentage increase 

required under the Affordable Care Act. 

Therefore, for those hospitals paid under 

§ 413.40 of the regulations, the update is the 

percentage increase in the FY 2016 IPPS 

operating market basket, estimated at 2.7 

percent, without the reductions described 

above under the Affordable Care Act. 

The impact of the update in the rate-ofincrease limit on those excluded hospitals 

depends on the cumulative cost increases 


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experienced by each excluded hospital since 

its applicable base period. For excluded 

hospitals that have maintained their cost 

increases at a level below the rate-of-increase 

limits since their base period, the major effect 

is on the level of incentive payments these 

excluded hospitals receive. Conversely, for 

excluded hospitals with cost increases above 

the cumulative update in their rate-ofincrease limits, the major effect is the amount 

of excess costs that will not be paid. 

We note that, under § 413.40(d)(3), an 

excluded hospital that continues to be paid 

under the TEFRA system and whose costs 

exceed 110 percent of its rate-of-increase 

limit receives its rate-of-increase limit plus 

the lesser of: (1) 50 percent of its reasonable 

costs in excess of 110 percent of the limit, or 

(2) 10 percent of its limit. In addition, under 

the various provisions set forth in § 413.40, 

hospitals can obtain payment adjustments for 

justifiable increases in operating costs that 

exceed the limit. 

G. Quantitative Effects of the Proposed Policy 

Changes Under the IPPS for Operating Costs 

1. Basis and Methodology of Estimates 

In this proposed rule, we are announcing 

proposed policy changes and proposed 

payment rate updates for the IPPS for FY 

2016 for operating costs of acute care 

hospitals. The proposed FY 2016 updates to 

the capital payments to acute care hospitals 

are discussed in section I.I. of this Appendix. 

Based on the overall percentage change in 

payments per case estimated using our 

payment simulation model, we estimate that 

total FY 2016 operating payments will 

increase by 0.3 percent compared to FY 2015. 

In addition to the applicable percentage 

increase, this amount reflects the proposed 

FY 2016 recoupment adjustment for 

documentation and coding described in 

section II.D. of the preamble of this proposed 

rule of ¥0.8 percent to the IPPS national 

standardized amounts. The impacts do not 

reflect changes in the number of hospital 

admissions or real case-mix intensity, which 

will also affect overall payment changes. 

We have prepared separate impact analyses 

of the proposed changes to each system. This 

section deals with the proposed changes to 

the operating inpatient prospective payment 

system for acute care hospitals. Our payment 

simulation model relies on the most recent 

available data to enable us to estimate the 

impacts on payments per case of certain 

changes in this proposed rule. However, 

there are other proposed changes for which 

we do not have data available that will allow 

us to estimate the payment impacts using this 

model. For those proposed changes, we have 

attempted to predict the payment impacts 

based upon our experience and other more 

limited data. 

The data used in developing the 

quantitative analyses of proposed changes in 

payments per case presented below are taken 

from the FY 2014 MedPAR file and the most 

current Provider-Specific File (PSF) that is 

used for payment purposes. Although the 

analyses of the proposed changes to the 

operating PPS do not incorporate cost data, 

data from the most recently available hospital 

cost reports were used to categorize 

hospitals. Our analysis has several 

qualifications. First, in this analysis, we do 

not make adjustments for future changes in 

such variables as admissions, lengths of stay, 

or underlying growth in real case-mix. 

Second, due to the interdependent nature of 

the IPPS payment components, it is very 

difficult to precisely quantify the impact 

associated with each proposed change. Third, 

we use various data sources to categorize 

hospitals in the tables. In some cases, 

particularly the number of beds, there is a 

fair degree of variation in the data from the 

different sources. We have attempted to 

construct these variables with the best 

available source overall. However, for 

individual hospitals, some 

miscategorizations are possible. 

Using cases from the FY 2014 MedPAR 

file, we simulated payments under the 

operating IPPS given various combinations of 

payment parameters. As described above, 

Indian Health Service hospitals and hospitals 

in Maryland were excluded from the 

simulations. The proposed impact of 

payments under the capital IPPS, or the 

proposed impact of payments for costs other 

than inpatient operating costs, are not 

analyzed in this section. Estimated payment 

impacts of the capital IPPS for FY 2016 are 

discussed in section I.I. of this Appendix. 

We discuss the following changes below: 

• The effects of the proposed application 

of the documentation and coding adjustment 

and the applicable percentage increase 

(including the proposed market basket 

update, the proposed multifactor 

productivity adjustment, and the applicable 

percentage reduction in accordance with the 

Affordable Care Act) to the standardized 

amount and hospital-specific rates. 

• The effects of the proposed changes to 

the relative weights and MS–DRG GROUPER. 

• The effects of the proposed changes in 

hospitals’ wage index values reflecting 

updated wage data from hospitals’ cost 

reporting periods beginning during FY 2012, 

compared to the FY 2011 wage data, to 

calculate the proposed FY 2016 wage index. 

• The combined effects of the proposed 

recalibration of the MS–DRG relative weights 

as required by section 1886(d)(4)(C) of the 

Act and the proposed wage index (including 

the updated wage data and the continued 

implementation of the new OMB labor 

market area delineations), including the 

proposed wage and recalibration budget 

neutrality factors. 

• The effects of the geographic 

reclassifications by the MGCRB (as of 

publication of this proposed rule) that would 

be effective for FY 2016. 

• The effects of the proposed rural floor 

and imputed floor with the application of the 

proposed national budget neutrality factor to 

the wage index. 

• The effects of the second year of the 3- 

year transition for urban hospitals that were 

located in an urban county that become rural 

under the new OMB delineations or hospitals 

deemed urban where the urban area became 

rural under the new OMB delineations. 

• The effects of the proposed frontier State 

wage index adjustment under the statutory 

provision that requires that hospitals located 

in States that qualify as frontier States to not 

have a wage index less than 1.0. This 

provision is not budget neutral. 

• The effects of the implementation of 

section 1886(d)(13) of the Act, as added by 

section 505 of Public Law 108–173, which 

provides for an increase in a hospital’s wage 

index if a threshold percentage of residents 

of the county where the hospital is located 

commute to work at hospitals in counties 

with higher wage indexes. This provision is 

not budget neutral. 

• The total estimated change in payments 

based on the proposed FY 2016 policies 

relative to payments based on FY 2015 

policies that include the applicable 

percentage increase of 1.9 percent (or 2.7 

percent market basket update with a 

proposed reduction of 0.6 percentage point 

for the multifactor productivity adjustment, 

and a 0.2 percentage point reduction, as 

required under the Affordable Care Act). 

To illustrate the impact of the proposed FY 

2016 changes, our analysis begins with a FY 

2015 baseline simulation model using: the 

FY 2015 applicable percentage increase of 2.2 

percent and the documentation and coding 

recoupment adjustment of ¥0.8 percent to 

the Federal standardized amount; the FY 

2015 MS–DRG GROUPER (Version 32); the 

FY 2015 CBSA designations for hospitals 

based on the new OMB definitions; the FY 

2015 wage index; and no MGCRB 

reclassifications. Outlier payments are set at 

5.1 percent of total operating MS–DRG and 

outlier payments for modeling purposes. 

Section 1886(b)(3)(B)(viii) of the Act, as 

added by section 5001(a) of Public Law 109– 

171, as amended by section 4102(b)(1)(A) of 

the ARRA (Pub. L. 111–5) and by section 

3401(a)(2) of the Affordable Care Act (Pub. L. 

111–148), provides that, for FY 2007 and 

each subsequent year through FY 2014, the 

update factor will include a reduction of 2.0 

percentage points for any subsection (d) 

hospital that does not submit data on 

measures in a form and manner and at a time 

specified by the Secretary. Beginning in FY 

2015, the reduction is one-quarter of such 

applicable percentage increase determined 

without regard to section 1886(b)(3)(B)(ix), 

(xi), or (xii) of the Act, or one-quarter of the 

market basket update. Therefore, for FY 2016, 

we are proposing that hospitals that do not 

submit quality information under rules 

established by the Secretary and that are 

meaningful EHR users under section 

1886(b)(3)(B)(ix) of the Act would receive an 

applicable percentage increase of 1.225 

percent. At the time that this impact was 

prepared, 26 hospitals are estimated to not 

receive the full market basket rate-of-increase 

for FY 2015 because they failed the quality 

data submission process or did not choose to 

participate. For purposes of the simulations 

shown below, we modeled the proposed 

payment changes for FY 2016 using a 

proposed reduced update for these 26 

hospitals. However, we do not have enough 

information at this time to determine which 

hospitals will not receive the full update 

factor for FY 2016. 

For FY 2016, in accordance with section 

1886(b)(3)(B)(ix) of the Act, a hospital that 

has been identified as not an meaningful EHR 

user will be subject to a reduction of one-half 

of such applicable percentage increase 

determined without regard to section 

1886(b)(3)(B)(ix), (xi), or (xii) of the Act. 


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Therefore, for FY 2016, we are proposing that 

hospitals that are identified as not 

meaningful EHR users and do submit quality 

information under section 1886(b)(3)(B)(viii) 

of the Act would receive an applicable 

percentage increase of 0.55 percent. At the 

time that this impact analysis was prepared, 

153 hospitals are estimated to not receive the 

full market basket rate-of-increase for FY 

2015 because they are identified as not 

meaningful EHR users that do submit quality 

information under section 1886(b)(3)(B)(viii) 

of the Act. For purposes of the simulations 

shown below, we modeled the proposed 

payment changes for FY 2016 using a 

proposed reduced update for these 153 

hospitals. We did not include these hospitals 

in the model for estimation purposes for FY 

2015 because that was the first year hospitals 

experienced a reduction to their applicable 

percentage increase due to whether they are 

meaningful EHR users and data were not 

available at that time. However, we believe 

it is appropriate to include these 153 

hospitals for estimation purposes in FY 2016 

because FY 2016 will be the second year in 

which hospitals will experience this 

reduction and data on the prior year’s 

performance are now available. For purposes 

of the simulations shown below, we modeled 

the proposed payment changes for FY 2016 

using a proposed reduced update for these 

153 hospitals. However, we do not have 

enough information at this time to determine 

which hospitals will not receive the full 

update increase for FY 2016. 

Hospitals that are identified as not 

meaningful EHR users under section 

1886(b)(3)(B)(ix) of the Act and also do not 

submit quality data under section 

1886(b)(3)(B)(viii) of the Act would receive 

an applicable percentage increase of ¥0.125 

percent, which reflects a one-quarter 

reduction of the market basket update for 

failure to submit quality data and a one-half 

reduction of the market basket update for 

being identified as not a meaningful EHR 

user. At the time that this impact was 

prepared, 24 hospitals are estimated to not 

receive the full market basket rate-of-increase 

for FY 2016 because they are identified as not 

meaningful EHR users that do not submit 

quality data under section 1886(b)(3)(B)(viii) 

of the Act. We did not include these 

hospitals in the model for estimation 

purposes for FY 2015 because that was the 

first year hospitals experienced a reduction 

to their applicable percentage increase due to 

whether they are meaningful EHR users and 

data were not available at that time. 

However, we believe it is appropriate to 

include these 24 hospitals for estimation 

purposes in FY 2016 because FY 2016 will 

be the second year in which hospitals will 

experience this reduction and data on the 

prior year’s performance are now available. 

For purposes of the simulations shown 

below, we modeled the proposed payment 

changes for FY 2016 using a proposed 

reduced update for these 24 hospitals. 

However, we do not have enough 

information at this time to determine which 

hospitals will not receive the full update 

increase for FY 2016. 

Each proposed policy change, statutory or 

otherwise, is then added incrementally to 

this baseline, finally arriving at an FY 2016 

model incorporating all of the proposed 

changes. This simulation allows us to isolate 

the effects of each proposed change. 

Our final comparison illustrates the 

percent change in payments per case from FY 

2015 to FY 2016. Three factors not discussed 

separately have significant impacts here. The 

first factor is the proposed update to the 

standardized amount. In accordance with 

section 1886(b)(3)(B)(i) of the Act, we are 

proposing to update the standardized 

amounts for FY 2016 using a proposed 

applicable percentage increase of 1.9 percent. 

This includes our forecasted IPPS operating 

hospital market basket increase of 2.7 percent 

with a proposed reduction of 0.6 percentage 

point for the multifactor productivity 

adjustment and a 0.2 percentage point 

reduction as required under the Affordable 

Care Act. Hospitals that fail to comply with 

the quality data submission requirements and 

are meaningful EHR users would receive a 

proposed update of 1.225 percent. This 

proposed update includes a reduction of onequarter of the market basket update for 

failure to submit these data. Hospitals that do 

comply with the quality data submission 

requirements but are not meaningful EHR 

users would receive an update of 0.55 

percent, which includes a reduction of onehalf of the market basket update. 

Furthermore, hospitals that do not comply 

with the quality data submission 

requirements and also are not meaningful 

EHR users would receive an update of 

¥0.125 percent. Under section 

1886(b)(3)(B)(iv) of the Act, the update to the 

hospital-specific amounts for SCHs also are 

equal to the applicable percentage increase, 

or 1.9 percent if the hospital submits quality 

data and is a meaningful EHR user. In 

addition, we are proposing to update the 

Puerto Rico-specific amount by an applicable 

percentage increase of 1.9 percent. 

A second significant factor that affects the 

proposed changes in hospitals’ payments per 

case from FY 2015 to FY 2016 is the change 

in hospitals’ geographic reclassification 

status from one year to the next. That is, 

payments may be reduced for hospitals 

reclassified in FY 2015 that are no longer 

reclassified in FY 2016. Conversely, 

payments may increase for hospitals not 

reclassified in FY 2015 that are reclassified 

in FY 2016. 

A third significant factor is that we 

currently estimate that actual outlier 

payments during FY 2015 will be 4.9 percent 

of total MS–DRG payments. When the FY 

2015 IPPS/LTCH PPS final rule was 

published, we projected FY 2015 outlier 

payments would be 5.1 percent of total MS– 

DRG plus outlier payments; the average 

standardized amounts were offset 

correspondingly. The effects of the lower 

than expected outlier payments during FY 

2015 (as discussed in the Addendum to this 

proposed rule) are reflected in the analyses 

below comparing our current estimates of FY 

2015 payments per case to estimated 

proposed FY 2016 payments per case (with 

outlier payments projected to equal 5.1 

percent of total MS–DRG payments). 

2. Analysis of Table I 

Table I displays the results of our analysis 

of the proposed changes for FY 2016. The 

table categorizes hospitals by various 

geographic and special payment 

consideration groups to illustrate the varying 

impacts on different types of hospitals. The 

top row of the table shows the overall impact 

on the 3,366 acute care hospitals included in 

the analysis. 

The next four rows of Table I contain 

hospitals categorized according to their 

geographic location: All urban, which is 

further divided into large urban and other 

urban; and rural. There are 2,530 hospitals 

located in urban areas included in our 

analysis. Among these, there are 1,390 

hospitals located in large urban areas 

(populations over 1 million), and 1,140 

hospitals in other urban areas (populations of 

1 million or fewer). In addition, there are 836 

hospitals in rural areas. The next two 

groupings are by bed-size categories, shown 

separately for urban and rural hospitals. The 

final groupings by geographic location are by 

census divisions, also shown separately for 

urban and rural hospitals. 

The second part of Table I shows hospital 

groups based on hospitals’ proposed FY 2016 

payment classifications, including any 

reclassifications under section 1886(d)(10) of 

the Act. For example, the rows labeled urban, 

large urban, other urban, and rural show that 

the numbers of hospitals paid based on these 

categorizations after consideration of 

geographic reclassifications (including 

reclassifications under sections 1886(d)(8)(B) 

and 1886(d)(8)(E) of the Act that have 

implications for capital payments) are 2,479; 

1,383; 1,096; and 887, respectively. 

The next three groupings examine the 

impacts of the proposed changes on hospitals 

grouped by whether or not they have GME 

residency programs (teaching hospitals that 

receive an IME adjustment) or receive 

Medicare DSH payments, or some 

combination of these two adjustments. There 

are 2,325 nonteaching hospitals in our 

analysis, 794 teaching hospitals with fewer 

than 100 residents, and 247 teaching 

hospitals with 100 or more residents. 

In the DSH categories, hospitals are 

grouped according to their DSH payment 

status, and whether they are considered 

urban or rural for DSH purposes. The next 

category groups together hospitals considered 

urban or rural, in terms of whether they 

receive the IME adjustment, the DSH 

adjustment, both, or neither. 

The next three rows examine the impacts 

of the proposed changes on rural hospitals by 

special payment groups (SCHs, RRCs). There 

were 211 RRCs, 327 SCHs, and 125 hospitals 

that are both SCHs and RRCs. 

The next series of groupings are based on 

the type of ownership and the hospital’s 

Medicare utilization expressed as a percent 

of total patient days. These data were taken 

from the FY 2013 or FY 2012 Medicare cost 

reports. 

The next two groupings concern the 

geographic reclassification status of 

hospitals. The first grouping displays all 

urban hospitals that were reclassified by the 

MGCRB for FY 2016. The second grouping 

shows the MGCRB rural reclassifications. 


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TABLE I.-IMPACT ANALYSIS OF PROPOSED CHANGES TO THE IPPS FOR OPERATING C

FY 2016 

Proposed 

Proposed Proposed Rural and 

Proposed FY 2016 FY 2016 Imputed Applic

FY 2016 Wage Data DRG,Rel. Floor with of th

Weights and under New Wts., Wage Application Propo

Proposed DRGChanges CBSA Index of National Front

Hospital Rate with Designations Changes with Rural and Wage I

Update and Application of with Wage and Imputed and Pro

Number Documentation Recalibration Application of Recalibration FY 2016 Floor Out-M

of and Coding Budget Wage Budget Budget MGCRB Budget tion 

Hospitals Adjustment Neutrality Neutrality Neutrality Reclassifications Neutrality Adjust

(1)' (2)2 (3)' (4)4 (5)5 (6) 6 (7) 7 (8)

All Hospitals 3,366 1.1 0 0 0 0 0 

By Geographic 

Location: 

Urban hospitals 2,530 1.1 0 0 0 -0.1 0 

Large urban areas 1,390 1.1 0.1 0.1 0.2 -0.3 0 

Other urban areas 1,140 1.1 0 -0.1 -0.2 0.1 0.1 

Rural hospitals 836 1.5 -0.2 -0.4 -0.5 1.4 -0.3 

Bed Size (Urban): 

0-99 beds 666 1.1 -0.2 -0.1 -0.2 -0.6 0 

100-199 beds 777 1.1 -0.1 0.1 0.1 0 0.2 

200-299 beds 446 1.1 0 0 -0.1 0.1 0.1 

300-499 beds 428 1.1 0 0 0 -0.2 0.1 

500 or more beds 213 1.1 0.1 0 0.2 -0.2 -0.2 

Bed Size (Rural): 

0-49 beds 329 1.4 -0.2 -0.3 -0.5 0.4 -0.3 

50-99 beds 298 1.5 -0.3 -0.3 -0.5 0.9 -0.3 

100-149 beds 121 1.6 -0.2 -0.3 -0.4 1.4 -0.2 

150-199 beds 48 1.4 -0.2 -0.5 -0.6 2.1 -0.3 

200 or more beds 40 1.3 -0.1 -0.6 -0.5 2.4 -0.3 

Urban by Reeion: 

New England 120 1.1 0 0.9 1 1.3 1.6 

Middle Atlantic 318 1.1 0.1 0.4 0.4 0.5 -0.4 

South Atlantic 407 1.1 0 0.1 0.1 -0.4 -0.4 

East North Central 396 1.1 0 -0.1 -0.1 -0.4 -0.5 East South Central 150 1.1 0 -0.3 -0.3 -0.6 -0.4 

West North Central 165 1.1 0 -0.4 -0.4 -0.7 -0.4 West South Central 382 1.1 0 -0.4 -0.4 -0.5 -0.5 

Mountain 161 1.2 -0.1 0 -0.1 0 -0.1 

Pacific 380 1 0 0 -0.1 -0.1 1.8 

Puerto Rico 51 1.2 0 -1.1 -1 -1 0.1 

Rural by Reeion: 

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Proposed 

Proposed Proposed Rural and 

Proposed FY 2016 FY 2016 Imputed 

FY 2016 Wage Data DRG,Rel. Floor with 

Weights and under New Wts., Wage Application 

Proposed DRGChanges CBSA Index of National 

Hospital Rate with Designations Changes with Rural and 

Update and Application of with Wage and Imputed 

Number Documentation Recalibration Application of Recalibration FY 2016 Floor 

of and Coding Budget Wage Budget Budget MGCRB Budget 

Hospitals Adjustment Neutrality Neutrality Neutrality Reclassifications Neutrality 

(1)' (2)2 (3)' (4)4 (5)5 (6) 6 (7) 7 

New England 22 1.3 -0.1 -0.5 -0.6 1.9 -0.4 

Middle Atlantic 55 1.5 -0.1 0.4 0.2 0.7 -0.3 

South Atlantic 128 1.4 -0.2 -0.1 -0.4 2.2 -0.4 

East North Central 116 1.5 -0.2 -0.1 -0.3 1.3 -0.2 

East South Central 164 1.1 0 -1 -0.9 2.6 -0.5 

West North Central 101 1.8 -0.3 -0.3 -0.5 0.2 0 

West South Central 165 1.4 -0.1 -1 -0.9 1.5 -0.4 

Mountain 61 1.6 -0.3 -0.2 -0.4 0.2 -0.1 

Pacific 24 1.6 -0.4 0.2 -0.3 0.1 -0.2 

By Payment 

Classification: 

Urban hospitals 2,479 1.1 0 0 0.1 -0.1 0 

Large urban areas 1,383 1.1 0.1 0.1 0.2 -0.3 0 

Other urban areas 1,096 1.1 0 -0.1 -0.2 0.1 0.1 

Rural areas 887 1.4 -0.2 -0.3 -0.5 1.1 -0.2 

Teaching Status: 

Nonteaching 2,325 1.2 -0.1 -0.1 -0.1 0.1 0.2 

Fewer than 100 

residents 794 1.1 0 0 0 -0.1 0 

100 or more 

residents 247 1.1 0.1 0.1 0.3 0 -0.2 

UrbanDSH: 

Non-DSH 680 1.1 -0.1 0.1 0 0.1 0 

100 or more beds 1,572 1.1 0 0 0.1 -0.1 0 

Less than 100 beds 333 1.1 -0.1 0.1 0 -0.7 0 

RuralDSH: 

SCH 253 1.8 -0.3 -0.1 -0.4 0 -0.1 

RRC 220 1.4 -0.2 -0.3 -0.5 1.6 -0.2 

100 or more beds 33 0.9 0 -0.6 -0.5 1.8 -0.4 

Less than 100 beds 275 1 -0.1 -0.5 -0.5 1.3 -0.5 

Urban teaching and 

DSH: Both teaching and DSH 846 1.1 0.1 0 0.1 -0.2 -0.1 

Teaching and no 

DSH 132 1.1 -0.1 0.1 0 0.6 0.2 

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Proposed 

Proposed Proposed Rural and 

Proposed FY 2016 FY 2016 Imputed 

FY 2016 Wage Data DRG,Rel. Floor with 

Weights and under New Wts., Wage Application 

Proposed DRGChanges CBSA Index of National 

Hospital Rate with Designations Changes with Rural and 

Update and Application of with Wage and Imputed 

Number Documentation Recalibration Application of Recalibration FY 2016 Floor 

of and Coding Budget Wage Budget Budget MGCRB Budget 

Hospitals Adjustment Neutrality Neutrality Neutrality Reclassifications Neutrality 

(1)' (2)2 (3)' (4)4 (5)5 (6) 6 (7) 7 

No teaching and 

DSH 1,059 1.1 0 -0.1 -0.1 -0.1 0.4 

No teaching and no 

DSH 442 1.1 -0.1 0.2 0.1 -0.3 -0.1 

Special Hospital 

Types: 

RRC 211 1.1 -0.1 -0.6 -0.6 2.1 -0.3 

SCH 327 1.8 -0.3 -0.2 -0.4 0 -0.1 

SCHandRRC 125 1.8 -0.3 -0.1 -0.4 0.4 0 

Type of 

Ownership: 

Voluntary 1,934 1.1 0 0 0 0 0 

Proprietary 880 1.1 0 -0.1 -0.1 0 0.1 

Government 529 1.1 0 -0.1 0 -0.2 0.1 

Medicare 

Utilization as a 

Percent of 

Inpatient Days: 

0-25 713 1 0.1 0 0.1 -0.2 0.3 

25-50 2,110 1.1 0 0 0 0 -0.1 

50-65 332 1.2 -0.1 -0.1 -0.2 0.5 0 

Over 65 66 1.1 -0.1 0.4 0.2 0.2 0.1 

FY 2016 

Reclassifications by 

the Medicare 

Geographic Classification 

Review Board: 

All Reclassified 

Hospitals 861 1.1 0 0 0 2 0 

Non-Reclassified 

Hospitals 2,505 1.1 0 0 0 -0.9 0 

Urban Hospitals 

Reclassified 585 1.1 0 0 0.1 1.9 0 

Urban 

N onreclassified 

Hospitals 1,894 1.1 0 0 0.1 -0.9 0 

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Proposed 

Proposed Proposed Rural and 

Proposed FY 2016 FY 2016 Imputed 

FY 2016 Wage Data DRG,Rel. Floor with 

Weights and under New Wts., Wage Application 

Proposed DRGChanges CBSA Index of National 

Hospital Rate with Designations Changes with Rural and 

Update and Application of with Wage and Imputed 

Number Documentation Recalibration Application of Recalibration FY 2016 Floor 

of and Coding Budget Wage Budget Budget MGCRB Budget 

Hospitals Adjustment Neutrality Neutrality Neutrality Reclassifications Neutrality 

(1)' (2)2 (3)' (4)4 (5)5 (6) 6 (7) 7 

Rural Hospitals Reclassified Full 

Year 276 1.4 -0.2 -0.4 -0.5 2.3 -0.3 

Rural 

N onreclassified 

Hospitals Full Year 505 1.6 -0.2 -0.3 -0.5 -0.3 -0.2 

All Section 40 1 

Reclassified Hospitals: 58 1.4 -0.2 0 -0.2 -1 0.1 

Other Reclassified 

Hospitals (Section 

1886(d)(8)(B)) 55 1.2 -0.1 -0.4 -0.5 3.7 -0.5 

Specialty Hospitals 

Cardiac specialty 

Hospitals 14 1.1 0.3 -0.7 -0.3 -1.1 0 

1 Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category 

total. Discharge data are from FY 2014, and hospital cost report data are from reporting periods beginning in FY 2013 and F

2 This colunm displays the payment impact of the proposed hospital rate update and the proposed documentation and coding 

proposed 1.9 percent adjustment to the national standardized amount and hospital-specific rate (the estimated 2.7 percent ma

by the proposed 0.6 percentage point for the multifactor productivity adjustment and the 0.2 percentage point reduction unde

and the proposed -0.8 percent documentation and coding adjustment to the national standardized amount. 

3 This colunm displays the payment impact of the proposed changes to the Version 33 GROUPER, the proposed changes to 

proposed recalibration of the MS-DRG weights based on FY 2014 MedP AR data in accordance with section 1886( d)( 4 )(C)( 

displays the application of the proposed recalibration budget neutrality factor of 0. 9983 3 5 in accordance with section 1886( d

4 This colunm displays the payment impact of the proposed update to wage index data using FY 2012 cost report data and th

delineations based on 2010 Decennial Census data. This colunm displays the payment impact of the application of the prop

factor, which is calculated separately from the recalibration budget neutrality factor, and is calculated in accordance with sec

Act. The proposed wage budget neutrality factor is 0.998681. 

5 This colunm displays the combined payment impact of the proposed changes in Colunms 3 through 4 and the proposed cum

factor for MS-DRG and wage changes in accordance with section 1886(d)(4)(C)(iii) of the Act and section 1886(d)(3)(E) of 

cumulative wage and recalibration budget neutrality factor of 0. 997018 is the product of the proposed wage budget neutralit

recalibration budget neutrality factor. 

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6 Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MG

of the continued implementation of the new OMB labor market area delineations on these reclassifications. The effects de

FY 2016 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 2016. 

years has no bearing on the payment impacts shown here. This column reflects the proposed geographic budget neutrality 

7 This column displays the effects of the proposed rural floor and imputed floor based on the continued implementation of 

area delineations. The Affordable Care Act requires the rural floor budget neutrality adjustment to be 100 percent nationa

proposed rural floor budget neutrality factor (which includes the proposed imputed floor) applied to the wage index is 0.99

shows the effect of the 3 -year transition for hospitals that were located in urban counties that became rural under the new O

deemed urban where the urban area became rural under the new OMB delineations, with a budget neutrality factor of0.99

8 This column shows the combined impact of the policy required under section 103 24 of the Affordable Care Act that hosp

have a wage index no less than 1.0 and of section 1886(d)(l3) of the Act, as added by section 505 of Pub. L. 108-173, whi

a hospital's wage index if a threshold percentage of residents of the county where the hospital is located commute to work 

higher wage indexes. These are nonbudget neutral policies. 

9 This column shows the proposed changes in payments from FY 2015 to FY 2016. It reflects the impact of the proposed 

the proposed adjustment for documentation and coding. It also reflects proposed changes in hospitals' reclassification stat

FY 2015. It incorporates all of the proposed changes displayed in Columns 2, 5, 6, 7, and 8, (the proposed changes displa

included in Column 5). The sum of these impacts may be different from the proposed percentage changes shown here due 

effects. 
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24661 

a. Effects of the Proposed Hospital Update 

and Documentation and Coding Adjustment 

(Column 2) 

As discussed in section II.D. of the 

preamble of this proposed rule, this column 

includes the proposed hospital update, 

including the proposed 2.7 percent market 

basket update, the proposed reduction of 0.6 

percentage point for the multifactor 

productivity adjustment, and the 0.2 

percentage point reduction in accordance 

with the Affordable Care Act. In addition, 

this column includes the proposed FY 2016 

documentation and coding recoupment 

adjustment of ¥0.8 percent on the national 

standardized amount as part of the 

recoupment required by section 631 of the 

ATRA. As a result, we are proposing to make 

a 1.1 percent update to the national 

standardized amount. This column also 

includes the proposed 1.9 percent update to 

the hospital-specific rates which includes the 

proposed 2.7 percent market basket update, 

the proposed reduction of 0.6 percentage 

point for the multifactor productivity 

adjustment, and the 0.2 percentage point 

reduction in accordance with the Affordable 

Care Act. 

Overall, hospitals would experience a 1.1 

percent increase in payments primarily due 

to the combined effects of the proposed 

hospital update and the proposed 

documentation and coding adjustment on the 

national standardized amount and the 

proposed hospital update to the hospitalspecific rate. Hospitals that are paid under 

the hospital-specific rate, namely SCHs, 

would experience a 1.9 percent increase in 

payments; therefore, hospital categories with 

SCHs paid under the hospital-specific rate 

would experience increases in payments of 

more than 1.1 percent. 

b. Effects of the Proposed Changes to the MS– 

DRG Reclassifications and Relative CostBased Weights With Recalibration Budget 

Neutrality (Column 3) 

Column 3 shows the effects of the 

proposed changes to the MS–DRGs and 

relative weights with the application of the 

recalibration budget neutrality factor to the 

standardized amounts. Section 

1886(d)(4)(C)(i) of the Act requires us 

annually to make appropriate classification 

changes in order to reflect changes in 

treatment patterns, technology, and any other 

factors that may change the relative use of 

hospital resources. Consistent with section 

1886(d)(4)(C)(iii) of the Act, we are 

calculating a recalibration budget neutrality 

factor to account for the changes in MS– 

DRGs and relative weights to ensure that the 

overall payment impact is budget neutral. 

As discussed in section II.E. of the 

preamble of this proposed rule, the FY 2016 

MS–DRG relative weights will be 100 percent 

cost-based and 100 percent MS–DRGs. For 

FY 2016, the MS–DRGs are calculated using 

the FY 2014 MedPAR data grouped to the 

Version 33 (FY 2016) MS–DRGs. The 

methodology to calculate the relative weights 

and the reclassification changes to the 

GROUPER are described in more detail in 

section II.H. of the preamble of this proposed 

rule. 

The ‘‘All Hospitals’’ line in Column 3 

indicates that proposed changes due to the 

MS–DRGs and relative weights would result 

in a 0.0 percent change in payments with the 

application of the proposed recalibration 

budget neutrality factor of 0.998335 on to the 

standardized amount. Hospital categories 

that generally treat more surgical cases than 

medical cases would experience increases in 

their payments under the proposed relative 

weights. Rural hospitals would experience a 

0.2 percent decrease in payments because 

rural hospitals tend to treat fewer surgical 

cases than medical cases, while teaching 

hospitals with more than 100 residents 

would experience an increase in payments by 

0.1 percent as those hospitals treat more 

surgical cases than medical cases. 

c. Effects of the Proposed Wage Index 

Changes (Column 4) 

Column 4 shows the impact of proposed 

updated wage data using FY 2012 cost report 

data, with the application of the proposed 

wage budget neutrality factor. The wage 

index is calculated and assigned to hospitals 

on the basis of the labor market area in which 

the hospital is located. Under section 

1886(d)(3)(E) of the Act, beginning with FY 

2005, we delineate hospital labor market 

areas based on the Core Based Statistical 

Areas (CBSAs) established by OMB. The 

current statistical standards used in FY 2016 

are based on OMB standards published on 

February 28, 2013 (75 FR 37246 and 37252), 

and 2010 Decennial Census data (OMB 

Bulletin No. 13–01). (We refer readers to the 

FY 2015 IPPS/LTCH PPS final rule (79 FR 

49951 through 49963) for a full discussion on 

our adoption of the OMB labor market area 

delineations based on the 2010 Decennial 

Census data, effective beginning with the FY 

2015 IPPS wage index). 

Section 1886(d)(3)(E) of the Act requires 

that, beginning October 1, 1993, we annually 

update the wage data used to calculate the 

wage index. In accordance with this 

requirement, the proposed wage index for 

acute care hospitals for FY 2016 is based on 

data submitted for hospital cost reporting 

periods beginning on or after October 1, 2011 

and before October 1, 2012. The estimated 

impact of the proposed updated wage data 

using the FY 2012 cost report data and the 

OMB labor market area delineations on 

hospital payments is isolated in Column 4 by 

holding the other payment parameters 

constant in this simulation. That is, Column 

4 shows the proposed percentage change in 

payments when going from a model using the 

FY 2015 wage index, based on FY 2011 wage 

data, the labor-related share of 69.6 percent, 

under the OMB delineations and having a 

100-percent occupational mix adjustment 

applied, to a model using the FY 2016 prereclassification wage index based on FY 2012 

wage data with the labor-related share of 69.6 

percent, under the new OMB delineations, 

also having a 100-percent occupational mix 

adjustment applied, while holding other 

proposed payment parameters such as use of 

the Version 33 MS–DRG GROUPER constant. 

The proposed FY 2016 occupational mix 

adjustment is based on the CY 2013 

occupational mix survey. 

In addition, the column shows the impact 

of the application of the proposed wage 

budget neutrality to the national 

standardized amount. In FY 2010, we began 

calculating separate wage budget neutrality 

and recalibration budget neutrality factors, in 

accordance with section 1886(d)(3)(E) of the 

Act, which specifies that budget neutrality to 

account for wage index changes or updates 

made under that subparagraph must be made 

without regard to the 62 percent labor-related 

share guaranteed under section 

1886(d)(3)(E)(ii) of the Act. Therefore, for FY 

2016, we are calculating the wage budget 

neutrality factor to ensure that payments 

under updated wage data and the laborrelated share of 69.6 percent are budget 

neutral without regard to the lower laborrelated share of 62 percent applied to 

hospitals with a wage index less than or 

equal to 1.0. In other words, the wage budget 

neutrality is calculated under the assumption 

that all hospitals receive the higher laborrelated share of the standardized amount. 

The proposed FY 2016 wage budget 

neutrality factor is 0.998681, and the 

proposed overall payment change is 0.0 

percent. 

Column 4 shows the impacts of updating 

the wage data using FY 2012 cost reports. 

Overall, the new wage data and the laborrelated share, combined with the proposed 

wage budget neutrality adjustment, would 

lead to no change for all hospitals as shown 

in Column 4. 

In looking at the wage data itself, the 

proposed national average hourly wage 

increased 1.02 percent compared to FY 2015. 

Therefore, the only manner in which to 

maintain or exceed the previous year’s wage 

index was to match or exceed the national 

1.02 percent increase in average hourly wage. 

Of the 3,302 hospitals with wage data for 

both FYs 2015 and 2016, 1,673 or 50.7 

percent would experience an average hourly 

wage increase of 1.02 percent or more. 

The following chart compares the shifts in 

wage index values for hospitals due to 

proposed changes in the average hourly wage 

data for FY 2016 relative to FY 2015. Among 

urban hospitals, 9 would experience a 

decrease of 10 percent or more, and 13 urban 

hospitals would experience an increase of 10 

percent or more. One hundred and fifty-four 

urban hospitals would experience an 

increase or decrease of at least 5 percent or 

more but less than 10 percent. Among rural 

hospitals, 9 would experience a decrease of 

at least 5 percent but less than 10 percent, 

but no rural hospitals would experience an 

increase of greater than or equal to 5 percent 

but less than 10 percent. No rural hospital 

would experience increases or decreases of 

10 percent or more. However, 806 rural 

hospitals would experience increases or 

decreases of less than 5 percent, while 2,305 

urban hospitals would experience increases 

or decreases of less than 5 percent. Six urban 

hospitals would not experience a change in 

their wage index, and all rural hospitals 

would experience a change in their proposed 

wage indexes. These figures reflect proposed 

changes in the ‘‘pre-reclassified, occupational 

mix-adjusted wage index,’’ that is, the 

proposed wage index before the application 

of proposed geographic reclassification, the 

proposed rural and imputed floors, the 

proposed out-migration adjustment, and 

other proposed wage index exceptions and 

adjustments. (We refer readers to sections 


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24662 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

III.G.2. through III.I. of the preamble of this 

proposed rule for a complete discussion of 

the exceptions and adjustments to the wage 

index.) We note that the proposed ‘‘postreclassified wage index’’ or proposed 

‘‘payment wage index,’’ which is the 

proposed wage index that includes all such 

proposed exceptions and adjustments (as 

reflected in Tables 2 and 3 associated with 

this proposed rule, which are available via 

the Internet on the CMS Web site) is used to 

adjust the labor-related share of a hospital’s 

standardized amount, either 69.6 percent or 

62 percent, depending upon whether a 

hospital’s wage index is greater than 1.0 or 

less than or equal to 1.0. Therefore, the 

proposed pre-reclassified wage index figures 

in the chart below may illustrate a somewhat 

larger or smaller change than would occur in 

a hospital’s proposed payment wage index 

and total payment. 

The following chart shows the projected 

impact of proposed changes in the area wage 

index values for urban and rural hospitals. 

Proposed FY 2016 percentage change in area wage index values 

Number of hospitals 

Urban Rural 

Increase 10 percent or more ................................................................................................................................... 13 0 

Increase greater than or equal to 5 percent and less than 10 percent .................................................................. 60 0 

Increase or decrease less than 5 percent ............................................................................................................... 2,305 806 

Decrease greater than or equal to 5 percent and less than 10 percent ................................................................ 94 9 

Decrease 10 percent or more ................................................................................................................................. 9 0 

Unchanged ............................................................................................................................................................... 6 0 

d. Combined Effects of the Proposed MS– 

DRG and Wage Index Changes (Column 5) 

Section 1886(d)(4)(C)(iii) of the Act 

requires that changes to MS–DRG 

reclassifications and the relative weights 

cannot increase or decrease aggregate 

payments. In addition, section 1886(d)(3)(E) 

of the Act specifies that any updates or 

adjustments to the wage index are to be 

budget neutral. We computed a proposed 

wage budget neutrality factor of 0.998681 and 

a proposed recalibration budget neutrality 

factor of 0.998335 (which is also applied to 

the proposed Puerto Rico-specific 

standardized amount and the proposed 

hospital-specific rates). The product of the 

two proposed budget neutrality factors is the 

proposed cumulative wage and recalibration 

budget neutrality factor. The proposed 

cumulative wage and recalibration budget 

neutrality adjustment is 0.997018, or 

approximately 0.3 percent, which is applied 

to the national standardized amounts. 

Because the wage budget neutrality and the 

recalibration budget neutrality are calculated 

under different methodologies according to 

the statute, when the two budget neutralities 

are combined and applied to the 

standardized amount, the overall payment 

impact is not necessarily budget neutral. 

However, in this proposed rule, we are 

estimating that the proposed changes in the 

MS–DRG relative weights and proposed 

updated wage data with wage and budget 

neutrality applied would result in a 0.0 

percent change in payments. 

e. Effects of Proposed MGCRB 

Reclassifications (Column 6) 

Our impact analysis to this point has 

assumed acute care hospitals are paid on the 

basis of their actual geographic location (with 

the exception of ongoing policies that 

provide that certain hospitals receive 

payments on bases other than where they are 

geographically located). The proposed 

changes in Column 6 reflect the per case 

payment impact of moving from this baseline 

to a simulation incorporating the MGCRB 

decisions for FY 2016. 

By spring of each year, the MGCRB makes 

reclassification determinations that will be 

effective for the next fiscal year, which 

begins on October 1. The MGCRB may 

approve a hospital’s reclassification request 

for the purpose of using another area’s wage 

index value. Hospitals may appeal denials of 

MGCRB decisions to the CMS Administrator. 

Further, hospitals have 45 days from 

publication of the IPPS proposed rule in the 

Federal Register to decide whether to 

withdraw or terminate an approved 

geographic reclassification for the following 

year. 

The overall effect of geographic 

reclassification is required by section 

1886(d)(8)(D) of the Act to be budget neutral. 

Therefore, for purposes of this impact 

analysis, we are proposing to apply an 

adjustment of 0.988486 to ensure that the 

effects of the reclassifications under section 

1886(d)(10) of the Act are budget neutral 

(section II.A. of the Addendum to this 

proposed rule). Geographic reclassification 

generally benefits hospitals in rural areas. We 

estimate that the geographic reclassification 

would increase payments to rural hospitals 

by an average of 1.4 percent. By region, all 

the rural hospital categories would 

experience increases in payments due to 

MGCRB reclassifications. 

New Table 2 listed in section VI. of the 

Addendum to this proposed rule and 

available via the Internet on the CMS Web 

site reflects the proposed reclassifications for 

FY 2016. 

f. Effects of the Proposed Rural and Imputed 

Floor, Including Application of National 

Budget Neutrality (Column 7) 

As discussed in section III.B. of the 

preamble of the FY 2009 IPPS final rule, the 

FY 2010 IPPS/RY 2010 LTCH PPS final rule, 

the FYs 2011, 2012, 2013, 2014, and 2015 

IPPS/LTCH PPS final rules, and this 

proposed rule, section 4410 of Public Law 

105–33 established the rural floor by 

requiring that the wage index for a hospital 

in any urban area cannot be less than the 

wage index received by rural hospitals in the 

same State. We apply a uniform budget 

neutrality adjustment to the wage index. The 

imputed floor, which is also included in the 

calculation of the budget neutrality 

adjustment to the wage index, was extended 

in FY 2012 for 2 additional years and in FY 

2014 and FY 2015 for 1 additional year. Prior 

to FY 2013, only urban hospitals in New 

Jersey received the imputed floor. As 

discussed in the FY 2013 IPPS/LTCH PPS 

final rule (77 FR 53369), we established an 

alternative temporary methodology for the 

imputed floor, which resulted in an imputed 

floor for Rhode Island for FY 2013. For FY 

2014 and FY 2015, we extended the imputed 

rural floor, as calculated under the original 

methodology and the alternative 

methodology. Due to the adoption of the new 

OMB labor market area delineations in FY 

2015, the State of Delaware also became an 

all-urban state and thus eligible for an 

imputed floor. For FY 2016, we are proposing 

to extend the imputed rural floor for 1 year, 

as calculated under the original methodology 

and the alternative methodology. As a result, 

New Jersey, Rhode Island, and Delaware 

would be able to receive an imputed floor. In 

New Jersey, 16 out of 64 hospitals would 

receive the imputed floor, and 4 out of 11 

hospitals in Rhode Island would receive the 

imputed floor for FY 2016. For FY 2016, no 

hospitals would benefit from the imputed 

floor in Delaware because the CBSA wage 

index for each CBSA in Delaware under the 

new OMB delineations is equal to or higher 

than the imputed rural floor. 

The Affordable Care Act requires that we 

apply one rural floor budget neutrality factor 

to the wage index nationally, and the 

imputed floor is part of the rural floor budget 

neutrality factor applied to the wage index 

nationally. We have calculated a proposed 

FY 2016 rural floor budget neutrality factor 

to be applied to the wage index of 0.990135, 

which would reduce proposed wage indexes 

by 0.99 percent. 

Column 7 shows the projected impact of 

the proposed rural floor and imputed floor 

with the national rural floor budget neutrality 

factor applied to the wage index based on the 

OMB labor market area delineations. The 

column compares the proposed postreclassification FY 2016 wage index of 

providers before the proposed rural floor and 

imputed floor adjustment and the proposed 

post-reclassification FY 2016 wage index of 

providers with the proposed rural floor and 

imputed floor adjustment based on the OMB 

labor market area delineations. Only urban 

hospitals can benefit from the rural and 

imputed floors. Because the provision is 

budget neutral, all other hospitals (that is, all 

rural hospitals and those urban hospitals to 

which the adjustment is not made) would 

experience a decrease in payments due to the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24663 

budget neutrality adjustment that is applied 

nationally to their wage index. 

We estimate that 383 hospitals would 

benefit from the rural and imputed floors in 

FY 2016, while the remaining 2,983 IPPS 

hospitals in our model would have their 

wage index reduced by the proposed rural 

floor budget neutrality adjustment of 

0.990135 (or 0.99 percent). We project that, 

in aggregate, rural hospitals would 

experience a 0.3 percent decrease in 

payments as a result of the application of the 

proposed rural floor budget neutrality 

because the rural hospitals do not benefit 

from the rural floor, but have their wage 

indexes downwardly adjusted to ensure that 

the application of the rural floor is budget 

neutral overall. We project hospitals located 

in urban areas would experience no change 

in payments because increases in payments 

by hospitals benefitting from the rural floor 

offset decreases in payments by nonrural 

floor urban hospitals whose wage index is 

downwardly adjusted by the rural floor 

budget neutrality factor. Urban hospitals in 

the New England region would experience a 

1.6 percent increase in payments primarily 

due to the application of the proposed rural 

floor in Massachusetts. Thirty-nine urban 

providers in Massachusetts are expected to 

receive the rural floor wage index value, 

including the proposed rural floor budget 

neutrality of 0.990135, increasing payments 

overall to Massachusetts by an estimated $98 

million. We estimate that Massachusetts 

hospitals would receive approximately a 3.1 

percent increase in IPPS payments due to the 

application of the proposed rural floor in FY 

2016. 

Urban Puerto Rico hospitals are expected 

to experience a 0.1 percent change in 

payments as a result of the application of the 

proposed Puerto Rico rural floor with the 

application of the proposed Puerto Rico rural 

floor budget neutrality adjustment. We are 

proposing to apply a rural floor budget 

neutrality factor to the Puerto Rico-specific 

wage index of 0.987626 or 1.2 percent. The 

Puerto Rico-specific wage index adjusts the 

Puerto Rico-specific standardized amount, 

which represents 25 percent of payments to 

Puerto Rico hospitals. The increases in 

payments experienced by the urban Puerto 

Rico hospitals that benefit from a rural floor 

are offset by the decreases in payments by the 

urban Puerto Rico hospitals that do not 

benefit from the rural floor that have their 

wage indexes downwardly adjusted by the 

rural floor budget neutrality adjustment. As 

a result, overall, urban Puerto Rico hospitals 

would experience a 0.1 percent change in 

payments due to the application of the 

proposed rural floor with rural floor budget 

neutrality. 

There are 16 hospitals out of the 64 

hospitals in New Jersey that would benefit 

from the proposed extension of the imputed 

floor and would receive the proposed 

imputed floor wage index value under the 

OMB labor market area delineations, 

including the proposed rural floor budget 

neutrality of 0.990135 which we estimate 

would increase payments to those imputed 

floor hospitals by $20 million (overall, the 

State would not see an increase in payments 

due to the other hospitals in the State that 

would experience decreases in payments due 

to the proposed rural floor budget neutrality 

adjustment). Four Rhode Island hospitals 

would benefit from the proposed imputed 

rural floor calculated under the alternative 

methodology and would receive an 

additional $4.5 million (overall, the State 

would receive an additional $2.6 million). No 

hospitals would benefit from the proposed 

imputed floor in Delaware because the CBSA 

wage index for each CBSA in Delaware under 

the new OMB delineations is equal to or 

higher than the proposed imputed rural floor. 

Column 7 also shows the projected effects 

of the second year of the 3-year hold 

harmless provision for hospitals that were 

located in an urban county that became rural 

under the new OMB delineations or hospitals 

deemed urban where the urban area became 

rural under the new OMB delineations. As 

discussed in section III.G.2. of the preamble 

of this proposed rule, under this transition, 

hospitals that were located in an urban 

county that became rural under the new 

OMB delineations will generally be assigned 

the urban wage index value of the CBSA in 

which they are physically located in FY 2014 

for a period of 3 fiscal years (that is, FYs 

2015, 2016, and 2017). In addition, as 

discussed in section III.G.3. of the preamble 

of this proposed rule, under this transition, 

hospitals that were deemed urban where the 

urban area became rural under the new OMB 

delineations will generally be assigned the 

area wage index value of hospitals 

reclassified to the urban CBSA (that is, the 

attaching wage index, if applicable) to which 

they were designated in FY 2014. For FY 

2016, we are applying the 3-year transition 

wage index adjustments in a budget neutral 

manner, with a budget neutrality factor of 

0.999995. 

In response to a public comment addressed 

in the FY 2012 IPPS/LTCH PPS final rule (76 

FR 51593), we are providing the payment 

impact of the proposed rural floor and 

imputed floor with budget neutrality at the 

State level. Column 1 of the table below 

displays the number of IPPS hospitals 

located in each State. Column 2 displays the 

number of hospitals in each State that would 

receive the proposed rural floor or imputed 

floor wage index for FY 2016. Column 3 

displays the percentage of total payments 

each State would receive or contribute to 

fund the rural floor and imputed floor with 

national budget neutrality. The column 

compares the proposed post-reclassification 

FY 2016 wage index of providers before the 

proposed rural floor and imputed floor 

adjustment and the proposed postreclassification FY 2016 wage index of 

providers with the proposed rural floor and 

imputed floor adjustment. Column 4 displays 

the estimated payment amount that each 

State would gain or lose due to the 

application of the proposed rural floor and 

imputed floor with national budget 

neutrality. 

PROPOSED FY 2016 IPPS ESTIMATED PAYMENTS DUE TO PROPOSED RURAL FLOOR AND IMPUTED FLOOR WITH

NATIONAL BUDGET NEUTRALITY

State Number of hospitals 

Number of hospitals 

that would receive the 

proposed rural floor or 

imputed floor 

Proposed percent 

change in payments 

due to application of 

proposed rural floor 

and imputed floor with 

budget neutrality 

Proposed difference 

(in millions) 

(1) (2) (3) (4) 

Alabama ........................................................... 86 3 ¥0.4 $¥7.28 

Alaska .............................................................. 6 1 ¥0.3 ¥0.53 

Arizona ............................................................. 55 4 ¥0.5 ¥8.36 

Arkansas .......................................................... 46 2 ¥0.3 ¥3.08 

California .......................................................... 303 207 2.4 233.75 

Colorado .......................................................... 47 5 0.3 3.78 

Connecticut ...................................................... 31 7 ¥0.5 ¥7.46 

Delaware .......................................................... 6 0 ¥0.6 ¥2.53 

Washington, DC ............................................... 7 0 ¥0.5 ¥2.4 

Florida .............................................................. 170 14 ¥0.3 ¥16.98 

Georgia ............................................................ 105 0 ¥0.5 ¥12.17 

Hawaii .............................................................. 12 1 ¥0.4 ¥1.11 

Idaho ................................................................ 14 0 ¥0.4 ¥1.17 

Illinois ............................................................... 127 2 ¥0.5 ¥24.84 

Indiana ............................................................. 91 0 ¥0.5 ¥11.83 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24664 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

PROPOSED FY 2016 IPPS ESTIMATED PAYMENTS DUE TO PROPOSED RURAL FLOOR AND IMPUTED FLOOR WITH

NATIONAL BUDGET NEUTRALITY—Continued 

State Number of hospitals 

Number of hospitals 

that would receive the 

proposed rural floor or 

imputed floor 

Proposed percent 

change in payments 

due to application of 

proposed rural floor 

and imputed floor with 

budget neutrality 

Proposed difference 

(in millions) 

(1) (2) (3) (4) 

Iowa ................................................................. 35 0 ¥0.5 ¥4.3 

Kansas ............................................................. 53 0 ¥0.4 ¥3.7 

Kentucky .......................................................... 65 1 ¥0.4 ¥7.09 

Louisiana .......................................................... 98 1 ¥0.5 ¥6.53 

Maine ............................................................... 20 0 ¥0.5 ¥2.4 

Massachusetts ................................................. 61 39 3.1 98.3 

Michigan ........................................................... 96 0 ¥0.5 ¥21.72 

Minnesota ........................................................ 50 0 ¥0.3 ¥6.2 

Mississippi ........................................................ 64 0 ¥0.5 ¥4.86 

Missouri ............................................................ 78 2 ¥0.4 ¥8.38 

Montana ........................................................... 12 2 0.2 0.45 

Nebraska .......................................................... 25 0 ¥0.4 ¥2.44 

Nevada ............................................................. 24 4 0.3 2.35 

New Hampshire ............................................... 13 2 ¥0.2 ¥1.19 

New Jersey ...................................................... 64 16 0 0.43 

New Mexico ..................................................... 25 0 ¥0.3 ¥1.37 

New York ......................................................... 156 2 ¥0.6 ¥43.7 

North Carolina .................................................. 84 0 ¥0.4 ¥14.21 

North Dakota .................................................... 6 0 ¥0.3 ¥0.81 

Ohio ................................................................. 132 6 ¥0.5 ¥17.27 

Oklahoma ......................................................... 86 4 ¥0.4 ¥4.94 

Oregon ............................................................. 34 0 ¥0.5 ¥4.67 

Pennsylvania .................................................... 153 5 ¥0.5 ¥21.49 

Puerto Rico ...................................................... 51 10 0.1 0.15 

Rhode Island .................................................... 11 4 0.7 2.59 

South Carolina ................................................. 56 5 ¥0.2 ¥2.38 

South Dakota ................................................... 19 0 ¥0.3 ¥0.97 

Tennessee ....................................................... 99 19 ¥0.4 ¥9.65 

Texas ............................................................... 317 3 ¥0.5 ¥30.36 

Utah ................................................................. 34 2 ¥0.4 ¥1.95 

Vermont ........................................................... 6 0 ¥0.3 ¥0.61 

Virginia ............................................................. 78 1 ¥0.4 ¥11.47 

Washington ...................................................... 49 6 0.1 1.49 

West Virginia .................................................... 29 3 ¥0.2 ¥1.24 

Wisconsin ......................................................... 66 0 ¥0.5 ¥7.58 

Wyoming .......................................................... 11 0 ¥0.2 ¥0.24 

g. Effects of the Application of the Proposed 

Frontier State Wage Index and Proposed OutMigration Adjustment (Column 8) 

This column shows the combined effects of 

the application of section 10324(a) of the 

Affordable Care Act, which requires that we 

establish a minimum post-reclassified wageindex of 1.00 for all hospitals located in 

‘‘frontier States,’’ and the effects of section 

1886(d)(13) of the Act, as added by section 

505 of Public Law 108–173, which provides 

for an increase in the wage index for 

hospitals located in certain counties that 

have a relatively high percentage of hospital 

employees who reside in the county, but 

work in a different area with a higher wage 

index. These two wage index provisions are 

not budget neutral and increase payments 

overall by 0.1 percent compared to the 

provisions not being in effect. 

The term ‘‘frontier States’’ is defined in the 

statute as States in which at least 50 percent 

of counties have a population density less 

than 6 persons per square mile. Based on 

these criteria, 4 States (Montana, North 

Dakota, South Dakota, and Wyoming) are 

considered frontier States and 47 hospitals 

located in those States will receive a frontier 

wage index of 1.0000. Nevada is also, by 

definition, a frontier State and was assigned 

a frontier floor value of 1.0000 for FY 2012, 

but since then and including in this proposed 

rule, its rural floor value has been greater 

than 1.0000 so it has not been subject to the 

frontier wage index. Overall, this provision is 

not budget neutral and is estimated to 

increase IPPS operating payments by 

approximately $58 million. Rural and urban 

hospitals located in the West North Central 

region would experience an increase in 

payments by 0.3 and 0.8 percent, 

respectively, because many of the hospitals 

located in this region are frontier State 

hospitals. 

In addition, section 1886(d)(13) of the Act, 

as added by section 505 of Public Law 108– 

173, provides for an increase in the wage 

index for hospitals located in certain 

counties that have a relatively high 

percentage of hospital employees who reside 

in the county, but work in a different area 

with a higher wage index. Hospitals located 

in counties that qualify for the payment 

adjustment are to receive an increase in the 

wage index that is equal to a weighted 

average of the difference between the wage 

index of the resident county, postreclassification and the higher wage index 

work area(s), weighted by the overall 

percentage of workers who are employed in 

an area with a higher wage index. There are 

an estimated 325 providers that would 

receive the out-migration wage adjustment in 

FY 2016. Rural hospitals generally qualify for 

the adjustment, resulting in a 0.1 percent 

increase in payments. This provision appears 

to benefit Section 401 hospitals and RRCs in 

that they would experience a 1.4 percent and 

0.5 percent increase in payments, 

respectively. This out-migration wage 

adjustment also is not budget neutral, and we 

estimate the impact of these providers 

receiving the out-migration increase would 

be approximately $39 million. 


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h. Effects of All Proposed FY 2016 Changes 

(Column 9) 

Column 9 shows our estimate of the 

proposed changes in payments per discharge 

from FY 2015 and FY 2016, resulting from all 

proposed changes reflected in this proposed 

rule for FY 2016. It includes combined effects 

of the previous columns in the table. 

The proposed average increase in 

payments under the IPPS for all hospitals is 

approximately 0.3 percent for FY 2016 

relative to FY 2015. As discussed in section 

II.D. of the preamble of this proposed rule, 

this column includes the proposed FY 2016 

documentation and coding recoupment 

adjustment of -0.8 percent on the national 

standardized amount as part of the 

recoupment required under section 631 of 

the ATRA. In addition, this column includes 

the proposed annual hospital update of 1.9 

percent to the national standardized amount. 

This proposed annual hospital update 

includes the 2.7 percent market basket 

update, the proposed reduction of 0.6 

percentage point for the multifactor 

productivity adjustment, and the 0.2 

percentage point reduction under section 

3401 of the Affordable Care Act. Hospitals 

paid under the hospital-specific rate would 

receive a 1.9 percent hospital update 

described above. As described in Column 2, 

the proposed annual hospital update with the 

proposed documentation and coding 

recoupment adjustment for hospitals paid 

under the national standardized amount 

combined with the proposed annual hospital 

update for hospitals paid under the hospitalspecific rate would result in a 1.1 percent 

increase in payments in FY 2016 relative to 

FY 2015. The impact of moving from our 

estimate of FY 2015 outlier payments, 4.9 

percent, to the proposed estimate of FY 2016 

outlier payments, 5.1 percent, would result 

in an increase of 0.2 percent in FY 2016 

payments relative to FY 2015. There also 

might be interactive effects among the 

various factors comprising the payment 

system that we are not able to isolate. For 

these reasons, the proposed values in 

Column 9 may not equal the sum of the 

proposed estimated percentage changes 

described above. 

Overall payments to hospitals paid under 

the IPPS due to the applicable percentage 

increase and changes to policies related to 

MS–DRGs, geographic adjustments, and 

outliers are estimated to increase by 0.3 

percent for FY 2016. Hospitals in urban areas 

would experience a 0.3 percent increase in 

payments per discharge in FY 2016 

compared to FY 2015. Hospital payments per 

discharge in rural areas are estimated to 

decrease by 0.3 percent in FY 2016. 

3. Impact Analysis of Table II 

Table II presents the projected impact of 

the proposed changes for FY 2016 for urban 

and rural hospitals and for the different 

categories of hospitals shown in Table I. It 

compares the estimated average payments 

per discharge for FY 2015 with the proposed 

estimated average payments per discharge for 

FY 2016, as calculated under our models. 

Therefore, this table presents, in terms of the 

average dollar amounts paid per discharge, 

the combined effects of the proposed changes 

presented in Table I. The proposed estimated 

percentage changes shown in the last column 

of Table II equal the proposed estimated 

percentage changes in average payments per 

discharge from Column 9 of Table I. 

TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2016 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE

PAYMENT SYSTEM

[Payments per discharge] 

Number of 

hospitals 

Estimated 

average 

FY 2015 

payment per 

discharge 

Estimated 

average 

FY 2016 

payment per 

discharge 

Proposed 

FY 2016 

changes 

(1) (2) (3) (4) 

All Hospitals ..................................................................................... 3,366 11,336 11,366 0.3 

By Geographic Location: 

Urban hospitals ......................................................................... 2,530 11,690 11,727 0.3 

Large urban areas .................................................................... 1,390 12,444 12,480 0.3 

Other urban areas .................................................................... 1,140 10,777 10,813 0.3 

Rural hospitals .......................................................................... 836 8,398 8,377 ¥0.3 

Bed Size (Urban): 

0–99 beds ................................................................................. 666 9,223 9,225 0 

100–199 beds ........................................................................... 777 9,866 9,896 0.3 

200–299 beds ........................................................................... 446 10,616 10,661 0.4 

300–499 beds ........................................................................... 428 11,934 11,976 0.4 

500 or more beds ..................................................................... 213 14,306 14,342 0.3 

Bed Size (Rural): 

0–49 beds ................................................................................. 329 6,996 6,927 ¥1 

50–99 beds ............................................................................... 298 7,914 7,844 ¥0.9 

100–149 beds ........................................................................... 121 8,286 8,311 0.3 

150–199 beds ........................................................................... 48 9,104 9,135 0.3 

200 or more beds ..................................................................... 40 10,004 10,017 0.1 

Urban by Region: 

New England ............................................................................ 120 12,840 12,848 0.1 

Middle Atlantic .......................................................................... 318 13,135 13,212 0.6 

South Atlantic ........................................................................... 407 10,396 10,424 0.3 

East North Central .................................................................... 396 10,960 10,997 0.3 

East South Central ................................................................... 150 10,003 9,973 ¥0.3 

West North Central ................................................................... 165 11,472 11,522 0.4 

West South Central .................................................................. 382 10,612 10,583 ¥0.3 

Mountain ................................................................................... 161 12,047 12,089 0.4 

Pacific ....................................................................................... 380 14,921 15,038 0.8 

Puerto Rico ............................................................................... 51 7,666 7,448 ¥2.8 

Rural by Region: 

New England ............................................................................ 22 11,325 11,195 ¥1.2 

Middle Atlantic .......................................................................... 55 8,473 8,422 ¥0.6 

South Atlantic ........................................................................... 128 7,839 7,841 0 

East North Central .................................................................... 116 8,731 8,744 0.1 

East South Central ................................................................... 164 7,522 7,433 ¥1.2 

West North Central ................................................................... 101 9,275 9,339 0.7 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
24666 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

TABLE II—IMPACT ANALYSIS OF PROPOSED CHANGES FOR FY 2016 ACUTE CARE HOSPITAL OPERATING PROSPECTIVE

PAYMENT SYSTEM—Continued 

[Payments per discharge] 

Number of 

hospitals 

Estimated 

average 

FY 2015 

payment per 

discharge 

Estimated 

average 

FY 2016 

payment per 

discharge 

Proposed 

FY 2016 

changes 

(1) (2) (3) (4) 

West South Central .................................................................. 165 7,196 7,115 ¥1.1 

Mountain ................................................................................... 61 9,731 9,815 0.9 

Pacific ....................................................................................... 24 11,521 11,634 1 

By Payment Classification: 

Urban hospitals ......................................................................... 2,479 11,718 11,757 0.3 

Large urban areas .................................................................... 1,383 12,450 12,487 0.3 

Other urban areas .................................................................... 1,096 10,804 10,845 0.4 

Rural areas ............................................................................... 887 8,565 8,539 ¥0.3 

Teaching Status: 

Nonteaching .............................................................................. 2,325 9,451 9,471 0.2 

Fewer than 100 residents ......................................................... 794 11,012 11,047 0.3 

100 or more residents .............................................................. 247 16,464 16,513 0.3 

Urban DSH: 

Non-DSH .................................................................................. 680 10,091 10,195 1 

100 or more beds ..................................................................... 1,572 12,096 12,121 0.2 

Less than 100 beds .................................................................. 333 8,643 8,656 0.2 

Rural DSH: 

SCH .......................................................................................... 253 8,611 8,677 0.8 

RRC .......................................................................................... 220 9,267 9,277 0.1 

100 or more beds ..................................................................... 33 7,695 7,580 ¥1.5 

Less than 100 beds .................................................................. 275 6,640 6,459 ¥2.7 

Urban teaching and DSH: 

Both teaching and DSH ............................................................ 846 13,227 13,257 0.2 

Teaching and no DSH .............................................................. 132 11,441 11,580 1.2 

No teaching and DSH .............................................................. 1,059 9,897 9,913 0.2 

No teaching and no DSH ......................................................... 442 9,448 9,555 1.1 

Special Hospital Types: 

RRC .......................................................................................... 211 9,459 9,405 ¥0.6 

SCH .......................................................................................... 327 9,962 10,065 1 

SCH and RRC .......................................................................... 125 10,597 10,719 1.2 

Type of Ownership: 

Voluntary ................................................................................... 1,934 11,504 11,550 0.4 

Proprietary ................................................................................ 880 10,007 9,996 ¥0.1 

Government .............................................................................. 529 12,252 12,248 0 

Medicare Utilization as a Percent of Inpatient Days: 

0–25 .......................................................................................... 713 13,536 13,454 ¥0.6 

25–50 ........................................................................................ 2,110 11,258 11,304 0.4 

50–65 ........................................................................................ 332 9,423 9,470 0.5 

Over 65 ..................................................................................... 66 9,484 9,541 0.6 

FY 2016 Reclassifications by the Medicare Geographic Classification Review Board: 

All Reclassified Hospitals ......................................................... 861 11,360 11,431 0.6 

Non-Reclassified Hospitals ....................................................... 2,505 11,325 11,338 0.1 

Urban Hospitals Reclassified ................................................... 585 11,961 12,048 0.7 

Urban Nonreclassified Hospitals .............................................. 1,894 11,624 11,644 0.2 

All Rural Hospitals Reclassified ................................................ 276 8,861 8,869 0.1 

Rural Nonreclassified Hospitals ................................................ 505 7,846 7,790 ¥0.7 

All Section 401 Reclassified Hospitals ..................................... 58 9,792 9,722 ¥0.7 

Other Reclassified Hospitals (Section 1886(d)(8)(B)) .............. 55 7,786 7,731 ¥0.7 

Specialty Hospitals: 

Cardiac Specialty Hospitals ...................................................... 14 12,652 12,780 1 

H. Effects of Other Proposed Policy Changes 

In addition to those proposed policy 

changes discussed above that we are able to 

model using our IPPS payment simulation 

model, we are proposing to make various 

other changes in this proposed rule. 

Generally, we have limited or no specific 

data available with which to estimate the 

impacts of these proposed changes. Our 

estimates of the likely impacts associated 

with these other proposed changes are 

discussed below. 

1. Effects of Proposed Policy on MS–DRGs for 

Preventable HACs, Including Infections 

In section II.F. of the preamble of this 

proposed rule, we discuss our 

implementation of section 1886(d)(4)(D) of 

the Act, which requires the Secretary to 

identify conditions that are: (1) High cost, 

high volume, or both; (2) result in the 

assignment of a case to an MS–DRG that has 

a higher payment when present as a 

secondary diagnosis; and (3) could 

reasonably have been prevented through 

application of evidence-based guidelines. For 

discharges occurring on or after October 1, 

2008, hospitals will not receive additional 

payment for cases in which one of the 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24667 

selected conditions was not present on 

admission, unless, based on data and clinical 

judgment, it cannot be determined at the time 

of admission whether a condition is present. 

That is, the case will be paid as though the 

secondary diagnosis were not present. 

However, the statute also requires the 

Secretary to continue counting the condition 

as a secondary diagnosis that results in a 

higher IPPS payment when doing the budget 

neutrality calculations for MS–DRG 

reclassifications and recalibration. Therefore, 

we will perform our budget neutrality 

calculations as though the payment provision 

did not apply, but Medicare will make a 

lower payment to the hospital for the specific 

case that includes the secondary diagnosis. 

Thus, the provision results in cost savings to 

the Medicare program. 

We note that the provision will only apply 

when one or more of the selected conditions 

are the only secondary diagnosis or diagnoses 

present on the claim that will lead to higher 

payment. Medicare beneficiaries will 

generally have multiple secondary diagnoses 

during a hospital stay, such that beneficiaries 

having one MCC or CC will frequently have 

additional conditions that also will generate 

higher payment. Only a small percentage of 

the cases will have only one secondary 

diagnosis that would lead to a higher 

payment. Therefore, if at least one 

nonselected secondary diagnosis that leads to 

higher payment is on the claim, the case will 

continue to be assigned to the higher paying 

MS–DRG and there will be no Medicare 

savings from that case. In addition, as 

discussed in section II.F.3. of the preamble of 

this proposed rule, it is possible to have two 

severity levels where the HAC does not affect 

the MS–DRG assignment or for an MS–DRG 

not to have severity levels. In either of these 

circumstances, the case will continue to be 

assigned to the higher paying MS–DRG and 

there will be no Medicare savings from that 

case. 

As discussed in section II.F. of the 

preamble of this proposed rule, for FY 2016, 

we are not proposing to add or remove any 

categories of HACs for FY 2016. 

The HAC payment provision went into 

effect on October 1, 2008. Our savings 

estimates for the next 5 fiscal years are 

shown below: 

Year Savings 

(in millions) 

FY 2016 ................................ $28 

FY 2017 ................................ 29 

FY 2018 ................................ 31 

FY 2019 ................................ 32 

FY 2020 ................................ 34 

2. Effects of Proposed Policy Relating to New 

Medical Service and Technology Add-On 

Payments 

In section II.I. of the preamble to this 

proposed rule, we discuss the nine 

technologies for which we received 

applications for add-on payments for new 

medical services and technologies for FY 

2016, as well as the status of the new 

technologies that were approved to receive 

new technology add-on payments in FY 

2015. As explained in the preamble to this 

proposed rule, add-on payments for new 

medical services and technologies under 

section 1886(d)(5)(K) of the Act are not 

required to be budget neutral. As discussed 

in section II.I.5. of the preamble of this 

proposed rule, we have not yet determined 

whether any of the nine technologies for 

which we received applications for 

consideration for new technology add-on 

payments for FY 2016 will meet the specified 

criteria. Consequently, it is premature to 

estimate the potential payment impact of 

these nine technologies for any potential new 

technology add-on payments for FY 2016. We 

note that if any of the nine technologies are 

found to be eligible for new technology addon payments for FY 2016, in the FY 2016 

IPPS/LTCH PPS final rule, we would discuss 

the estimated payment impact for FY 2016. 

In section II.I.4. of the preamble of this 

proposed rule, we are proposing to 

discontinue new technology add-on 

payments for Voraxaze®, the Zenith® F.Graft, 

and the Zilver® PTX® Drug Eluting 

Peripheral Stent for FY 2016 because these 

technologies will have been on the U.S. 

market for 3 years. We also are proposing to 

continue making new technology add-on 

payments for KcentraTM, the Argus® II 

Retinal Prosthesis System, the 

CardioMEMSTM HF Monitoring System, the 

MitraClip® System, and the RNS® System in 

FY 2016 because these technologies are still 

considered new. We note that new 

technology add-on payments per case are 

limited to the lesser of (1) 50 percent of the 

costs of the new technology or (2) 50 percent 

of the amount by which the costs of the case 

exceed the standard MS–DRG payment for 

the case. Because it is difficult to predict the 

actual new technology add-on payment for 

each case, our estimates below are based on 

the increase in add-on payments for FY 2016 

as if every claim that would qualify for a new 

technology add-on payment would receive 

the maximum add-on payment. For 

KcentraTM, based on the applicant’s estimate 

from FY 2014, we currently estimate that 

new technology add-on payments for 

KcentraTM will increase overall FY 2016 

payments by $5,449,888. For the Argus® II 

Retinal Prosthesis System, based on the 

applicant’s estimate from FY 2014, we 

currently estimate that new technology addon payments for the Argus® II Retinal 

Prosthesis System will increase overall FY 

2016 payments by $3,601,437. For the 

CardioMEMSTM HF Monitoring System, 

based on the applicant’s estimate from FY 

2015, we currently estimate that new 

technology add-on payments for the 

CardioMEMSTM HF Monitoring System will 

increase overall FY 2016 payments by 

$11,315,625. For the MitraClip® System, 

based on the applicant’s estimate from FY 

2015, we currently estimate that new 

technology add-on payments for the 

MitraClip® System will increase overall FY 

2016 payments by $27,000,000. For the RNS®

System, based on the applicant’s estimate 

from FY 2015, we currently estimate that 

new technology add-on payments for the 

RNS® System will increase overall FY 2016 

payments by $12,932,500. 

3. Effects of the Proposed Changes to 

Medicare DSH Payments for FY 2016 

As discussed in section IV.D. of the 

preamble of this proposed rule, under section 

3133 of the Affordable Care Act, hospitals 

that are eligible to receive Medicare DSH 

payments will receive 25 percent of the 

amount they previously would have received 

under the former statutory formula for 

Medicare DSH payments. The remainder, 

equal to an estimate of 75 percent of what 

otherwise formerly would have been paid as 

Medicare DSH payments that is reduced to 

reflect changes in the percentage of 

individuals under age 65 who are uninsured 

and additional statutory adjustments, is 

available to make additional payments to 

each hospital that qualifies for Medicare DSH 

payments. Each Medicare DSH hospital will 

receive an additional payment based on its 

estimated share of the total amount of 

uncompensated care for all Medicare DSH 

hospitals. The uncompensated care payment 

methodology has redistributive effects based 

on the proportion of a Medicare DSH’s lowincome insured patient days (sum of 

Medicaid patient days and Medicare SSI 

patient days) relative to the low-income 

insured patient days for all Medicare DSH 

hospitals (that is, Factor 3). The reduction to 

Medicare DSH payments due to the 

uncompensated care payment methodology 

is not budget neutral. 

In this FY 2016 IPPS/LTCH PPS proposed 

rule, the amount to be distributed as 

uncompensated care payments to DSH 

eligible hospitals is 75 percent of what 

otherwise would have been paid for 

Medicare DSH payment adjustments adjusted 

by a proposed Factor 2 of 63.69 percent; for 

FY 2015, the uncompensated care payment 

was 75 percent of what otherwise would 

have been paid for Medicare DSH payment 

adjustments adjusted by a Factor 2 of 76.19 

percent. In addition, for FY 2016, we are 

proposing to use data from the more recent 

of hospitals’ full year 2012 or full year 2011 

cost reports from the March 2015 update of 

the HCRIS database, 2012 cost report data 

submitted to CMS by IHS hospitals, and the 

most recent data (which we anticipate to be 

2013 data at the time we are developing the 

final rule) on SSI ratios to calculate Factor 3. 

That is, we are proposing to hold constant 

the 2012 and 2011 cost report years used to 

obtain Medicaid days in the FY 2015 IPPS/ 

LTCH PPS final rule but to use updated cost 

report data from a later extract of the HCRIS, 

to continue to use the 2012 cost report data 

submitted to CMS by IHS hospitals, and to 

use the most recent SSI ratios to calculate 

Factor 3 for FY 2016. 

To estimate the impact of the combined 

effect of proposed changes to reductions in 

the uninsured and additional statutory 

adjustments (Factor 2) and Medicaid patient 

days (a component of Factor 3) on the 

calculation of Medicare DSH payments, we 

compared DSH payments estimated in the FY 

2015 IPPS/LTCH PPS final rule to proposed 

DSH payments based on proposals in this FY 

2016 IPPS/LTCH PPS proposed rule. 

For FY 2015, for each hospital, we 

calculated the sum of (a) 25 percent of the 

estimated amount of what would have been 

paid as Medicare DSH in FY 2015 in the 


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24668 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

absence of section 3133 of the Affordable 

Care Act and (b) 75 percent of the estimated 

amount of what would have been paid as 

Medicare DSH payments in the absence of 

section 3133, adjusted by a Factor 2 of 76.19 

percent and multiplied by Factor 3 as stated 

in the FY 2015 IPPS/LTCH PPS final rule and 

correction notice. 

For FY 2016, we calculated the sum of (a) 

25 percent of the estimated amount of what 

would be paid as Medicare DSH payments in 

FY 2016 absent section 3133 and (b) 75 

percent of the estimated amount of what 

would have been paid as Medicare DSH 

payments absent section 3133, adjusted by a 

Factor 2 of 63.69 percent, as proposed, and 

multiplied by a Factor 3 calculated using the 

more recent of the hospitals’ full year 2012 

or full year 2011 cost report from the 

December 2014 update of the HCRIS 

database, 2012 cost report data submitted to 

CMS by IHS hospitals, and 2012 SSI ratios. 

We note that we used the most recent data 

available to estimate Factor 3 for FY 2016, as 

some of the data sources to be used under our 

proposed changes are not yet available. 

Our analysis included 2,234 hospitals 

projected to receive Medicare DSH payments 

in FY 2016 and did not include hospitals in 

the Rural Community Hospital 

Demonstration, hospitals that departed the 

Medicare program as of December 31, 2014, 

Maryland hospitals, SCHs that are expected 

to be paid based on their hospital-specific 

rates, and hospitals that are not included in 

2010 MedPAR file (for example, new 

hospitals). In addition, low-income insured 

days from merged or acquired hospitals were 

combined into the surviving hospital’s CCN, 

and the nonsurviving CCN was excluded 

from the analysis. The estimated impact of 

these proposed changes across a consistent 

universe of estimated FY 2016 DSHs, by 

hospital characteristic, is presented in the 

table below. 

MODELED DISPROPORTIONATE SHARE PAYMENT FOR ESTIMATED FY 2016 DSH HOSPITALS BY HOSPITAL TYPE: MODEL

DSH DOLLARS

[in millions] 

Number of 

estimated FY 

2016 DSH 

Hospitals 

FY 2015 final 

rule estimated 

DSH $ * 

FY 2016 

NPRM estimated 

DSH $ * 

Percentage 

change 

(0) (1) (2) (4) 

Total ................................................................................................. 2,234 $10,993 $9,738 ¥11.4 

By Geographic Location: 

Urban Hospitals ........................................................................ 1,745 10,443 9,253 ¥11.4 

Large Urban Areas ............................................................ 921 6,595 5,838 ¥11.5 

Other Urban Areas ............................................................ 824 3,848 3,415 ¥11.3 

Rural Hospitals ......................................................................... 488 549 485 ¥11.7 

Unknown ................................................................................... 1 1 0 ¥15.0 

Bed Size (Urban): 

0 to 99 Beds ............................................................................. 261 165 143 ¥12.9 

100 to 249 Beds ....................................................................... 776 2,443 2,160 ¥11.6 

250 to 499 Beds ....................................................................... 507 4,104 3,642 ¥11.3 

500+ Beds ................................................................................ 201 3,732 3,307 ¥11.4 

Bed Size (Rural): 

0 to 99 Beds ............................................................................. 352 220 192 ¥13.1 

100 to 249 Beds ....................................................................... 123 263 234 ¥10.9 

250 to 499 Beds ....................................................................... 12 65 58 ¥10.1 

500+ Beds ................................................................................ 1 1 1 ¥10.9 

Urban by Region: 

East North Central .................................................................... 288 1,412 1,249 ¥11.5 

East South Central ................................................................... 125 664 590 ¥11.2 

Middle Atlantic .......................................................................... 211 1,845 1,640 ¥11.1 

Mountain ................................................................................... 104 491 431 ¥12.3 

New England ............................................................................ 80 431 386 ¥10.5 

Pacific ....................................................................................... 284 1,733 1,555 ¥10.3 

Puerto Rico ............................................................................... 31 78 65 ¥17.3 

South Atlantic ........................................................................... 291 1,944 1,708 ¥12.1 

West North Central ................................................................... 95 484 426 ¥11.9 

West South Central .................................................................. 236 1,360 1,204 ¥11.5 

Rural by Region: 

East North Central .................................................................... 59 50 44 ¥12.3 

East South Central ................................................................... 145 185 164 ¥11.6 

Middle Atlantic .......................................................................... 26 35 31 ¥12.8 

Mountain ................................................................................... 21 15 13 ¥13.5 

New England ............................................................................ 9 16 14 ¥10.9 

Pacific ....................................................................................... 8 10 10 ¥7.7 

South Atlantic ........................................................................... 83 117 104 ¥11.1 

West North Central ................................................................... 29 22 19 ¥13.3 

West South Central .................................................................. 108 98 87 ¥11.5 

By Payment Classification: 

Urban Hospitals ........................................................................ 1,756 10,437 9,247 ¥11.4 

Large Urban Areas ............................................................ 935 6,605 5,847 ¥11.5 

Other Urban Areas ............................................................ 821 3,832 3,400 ¥11.3 

Rural Hospitals ......................................................................... 477 555 491 ¥11.6 

Unknown ................................................................................... 1 1 0 ¥15.0 

Teaching Status: 

Nonteaching .............................................................................. 1,397 3,394 2,993 ¥11.8 

Fewer than 100 residents ......................................................... 601 3,660 3,249 ¥11.2 

100 or more residents .............................................................. 235 3,939 3,496 ¥11.2 

Unknown ................................................................................... 1 1 0 ¥15.0 


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MODELED DISPROPORTIONATE SHARE PAYMENT FOR ESTIMATED FY 2016 DSH HOSPITALS BY HOSPITAL TYPE: MODEL

DSH DOLLARS—Continued 

[in millions] 

Number of 

estimated FY 

2016 DSH 

Hospitals 

FY 2015 final 

rule estimated 

DSH $ * 

FY 2016 

NPRM estimated 

DSH $ * 

Percentage 

change 

(0) (1) (2) (4) 

Type of Ownership: 

Voluntary ................................................................................... 1,344 7,161 6,353 ¥11.3 

Proprietary ................................................................................ 448 1,616 1,426 ¥11.7 

Government .............................................................................. 442 2,216 1,959 ¥11.6 

Medicare Utilization Percent: 

0–25 .......................................................................................... 381 2,828 2,485 ¥12.1 

25–50 ........................................................................................ 1,460 7,405 6,579 ¥11.2 

50–65 ........................................................................................ 331 686 608 ¥11.3 

Over 65 ..................................................................................... 61 73 65 ¥10.9 

Unknown ................................................................................... 1 1 0 ¥15.0 

Source: Dobson | DaVanzo analysis of 2011–2012 Hospital Cost Reports, 2010 MedPAR, and FY2015 Final Rule IPPS Impact File. 

* Estimated DSH dollars calculated by [0.25 * estimated section 1886(d)(5)(F) payments] + [0.75 * estimated section 1886(d)(5)(F) payments * 

Factor 2 * Factor 3]. When summed across all hospitals projected to receive DSH payments, the Model DSH is $9,378 million in 2016 and 

$10,993 million in 2015. For the FY 2015 IPPS/LTCH PPS final rule, Factor 2 is equal to 76.19 percent. The proposed Factor 2 for FY 2016 is 

63.69 percent. 

** Percent change is determined as the difference between Medicare DSH payments modeled for the FY 2016 IPPS/LTCH PPS proposed rule 

(column 2) and Medicare DSH payments modeled for the FY 2015 IPPS/LTCH PPS final rule (column 1) divided by Medicare DSH payments 

modeled for the FY 2015 final rule (column 1) times 100 percent . 

The impact analysis found that changes 

from the FY 2015 IPPS/LTCH PPS final rule 

were primarily driven by two components: 

(1) A reduction in the percentage of 

individuals who are uninsured, from 13.75 

percent in the FY 2015 IPPS/LTCH PPS final 

rule to 11.5 percent in this FY 2016 proposed 

rule; and (2) changes in the number of 

Medicaid days for 2012 (or 2011) obtained 

from each hospitals’ March 2014 HCRIS 

update of their Medicare cost report (used in 

the FY 2015 IPPS/LTCH PPS final rule) to the 

Medicaid days reported in the December 

2014 HCRIS update (used in this FY 2016 

proposed rule). The change in the percentage 

of individuals who are uninsured is a 

national estimate affecting all hospitals 

equally, while the change in Medicaid days 

is hospital-specific. For purposes of this 

proposed rule, the SSI ratios used in this 

analysis are the same 2012 SSI ratios used in 

the FY 2015 IPPS/LTCH PPS final rule and 

correction notice because the 2013 ratios are 

not yet available. 

The impact analysis table above shows that 

across all projected disproportionate share 

hospitals, FY 2016 DSH payments, including 

both empirically justified DSH payments and 

uncompensated care payments, are estimated 

at approximately $9.738 billion, or a decrease 

of 11.4 percent from FY 2015 DSH payments 

($10.993 billion). This is solely the result of 

a proposed reduction in Factor 2. As a result, 

we project that proposed payments for FY 

2016 to hospitals paid under the IPPS would 

be reduced overall by 1.0 percent as 

compared to overall payments to hospitals 

paid under the IPPS in FY 2015. 

Differences in the percent reduction in 

DSH payments were relatively small across 

most hospital categories because the overall 

average percent change in Medicaid days was 

relatively small compared to the overall 

percent reduction in the estimate of the 

percentage of individuals who are uninsured. 

Variation in the reductions in DSH payments 

were influenced by the change in the number 

of Medicaid days (the number of Medicaid 

days increased by 0.453 percent for all 

included hospitals from the FY 2015 IPPS/

LTCH PPS final rule to this FY 2016 IPPS/ 

LTCH PPS proposed rule) and each hospital 

characteristic group’s relative proportion of 

Medicaid to SSI days. We note that SSI days 

used in this analysis have not changed since 

the FY 2015 IPPS/LTCH PPS final rule; 

however, we anticipate using 2013 SSI days 

for the FY 2016 IPPS/LTCH PPS final rule. 

Rural hospitals are expected to experience a 

slightly larger decrease compared to urban 

hospitals, as defined by geographic location 

or payment classification. Among rural and 

urban hospitals, small hospitals (0 to 99 

beds) are expected to receive greater 

reductions in DSH payments compared to 

their larger counterparts, respectively. By 

region, urban hospitals located in Puerto Rico 

are expected to receive disproportionately 

larger reductions in DSH payments, while 

Pacific urban hospitals are expected to 

receive disproportionately smaller reductions 

in DSH payments. Rural hospitals located in 

the Mountain region also are projected to 

receive larger reductions in DSH payments, 

while rural hospitals in the Pacific region are 

projected to receive smaller reductions 

relative to the universe of projected FY 2016 

DSHs. Although urban hospitals in Puerto 

Rico are projected to receive 

disproportionately larger reductions in DSH 

payments, they are still expected to receive 

more in Medicare DSH and uncompensated 

care payments under section 3133 than if 

they were paid the amount they previously 

would have received under the former 

statutory formula for Medicare DSH 

payments. Nonteaching hospitals are 

projected to receive a larger reduction in DSH 

payments than both small and large teaching 

hospitals. Government hospitals are 

projected to receive larger reductions in DSH 

payments than not-for-profit hospitals, but 

smaller reductions compared to for-profit 

hospitals. In addition, hospitals with higher 

Medicare utilization are projected to receive 

smaller reductions in DSH payments relative 

to hospitals with lower Medicare utilization. 

4. Effects of Proposed Reduction Under the 

Hospital Readmissions Reduction Program 

In section IV.E. of the preamble of this 

proposed rule, we discuss our proposals for 

FY 2016 for the Hospital Readmissions 

Reduction Program (established under 

section 3025 of the Affordable Care Act), 

which requires a reduction to a hospital’s 

base operating DRG payments to account for 

excess readmissions. For FY 2016, the 

reduction is based on a hospital’s riskadjusted readmission rate during a 3-year 

period for five applicable conditions: Acute 

myocardial infarction, heart failure, 

pneumonia, total hip and total knee 

arthroplasty and chronic obstructive 

pulmonary disease. This provision is not 

budget neutral. A hospital’s readmission 

adjustment is the higher of a ratio of the 

hospital’s aggregate payments for excess 

readmissions to their aggregate payments for 

all discharges, or a floor, which has been 

defined in the statute as 0.97 (or a 3.0 percent 

reduction). A hospital’s base operating DRG 

payment (that is, wage-adjusted DRG 

payment amount, as discussed in section 

IV.E. of the preamble of this proposed rule) 

is the portion of the IPPS payment subject to 

the readmissions payment adjustment (DSH, 

IME, outliers and low-volume add-on 

payments are not subject to the readmissions 

adjustment). In this proposed rule, we 

estimate that 2,655 hospitals will have their 

base operating DRG payments reduced by 

their proxy FY 2016 hospital-specific 

readmissions adjustment. As a result, we 

estimate that the Hospital Readmissions 


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24670 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

Reduction Program would result in no 

material change in payments relative to FY 

2015. 

5. Effects of Proposed Changes Under the FY 

2016 Hospital Value-Based Purchasing (VBP) 

Program 

In section IV.F. of the preamble of this 

proposed rule, we discuss the Hospital VBP 

Program under which the Secretary makes 

value-based incentive payments to hospitals 

based on their performance on measures 

during the performance period with respect 

to a fiscal year. These incentive payments 

will be funded for FY 2016 through a 

reduction to the FY 2016 base operating DRG 

payment for each discharge of 1.75 percent, 

as required by section 1886(o)(7)(B) of the 

Act. The applicable percentage for FY 2017 

and subsequent years is 2 percent. The total 

amount available for value-based incentive 

payments must be equal to the total amount 

of reduced payments for all hospitals for the 

fiscal year, as estimated by the Secretary. 

We estimate the available pool of funds for 

value-based incentive payments in the FY 

2016 program year, which, in accordance 

with section 1886(o)(7)(C)(iv) of the Act, will 

be 1.75 percent of base operating DRG 

payments, or a total of approximately $1.49 

billion. This estimated available pool for FY 

2016 is based on the historical pool of 

hospitals that were eligible to participate in 

the FY 2015 program year and the payment 

information from the December 2014 update 

to the FY 2014 MedPAR file. 

The proposed estimated impacts of the FY 

2016 program year by hospital characteristic, 

found in the table below, are based on 

historical TPSs. We used the FY 2015 

program year’s TPSs to calculate the proxy 

adjustment factors used for this impact 

analysis. These are the most recently 

available scores that hospitals were given an 

opportunity to review and correct. The proxy 

adjustment factors use estimated annual base 

operating DRG payment amounts derived 

from the December 2014 update to the FY 

2014 MedPAR file. The proxy adjustment 

factors can be found in Table 16 associated 

with this proposed rule (available via the 

Internet on the CMS Web site). 

The impact analysis shows that, for the FY 

2016 program year, the number of hospitals 

that would receive an increase in base 

operating DRG payment amount is slightly 

higher than the number of hospitals that 

would receive a decrease. Among urban 

hospitals, those in the New England, South 

Atlantic, East North Central, East South 

Central, West North Central, West South 

Central, Mountain, and Pacific regions would 

have an increase, on average, in the base 

operating DRG payment amount. Urban 

hospitals in the Middle Atlantic region 

would receive an average decrease in the 

base operating payment amount. Among 

rural hospitals, those in all regions would 

have an increase, on average, in base 

operating DRG payment amounts. 

On average, hospitals that receive a higher 

percent of DSH payments would receive 

decreases in the base operating DRG payment 

amount. With respect to hospitals’ Medicare 

utilization (MCR), those hospitals with an 

MCR above 65 percent would have the largest 

increase, on average, in base operating DRG 

payment amounts. 

Nonteaching hospitals would have an 

average increase, and teaching hospitals 

would experience an average decrease, in the 

base operating DRG payment amount. 

IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT PROPOSED CHANGES RESULTING FROM THE FY 2016 

HOSPITAL VBP PROGRAM

Number of 

hospitals 

Average 

percentage 

change 

By Geographic Location: 

All Hospitals ...................................................................................................................................................... 3,089 0.133 

Large Urban .............................................................................................................................................. 1,262 0.046 

Other Urban ............................................................................................................................................... 1,066 0.137 

Rural Area ................................................................................................................................................. 760 0.269 

Missing * .................................................................................................................................................... 1 1.009 

Urban hospitals ................................................................................................................................................. 2,328 0.088 

0–99 beds .................................................................................................................................................. 515 0.506 

100–199 beds ............................................................................................................................................ 735 0.025 

200–299 beds ............................................................................................................................................ 445 ¥0.055 

300–499 beds ............................................................................................................................................ 423 ¥0.075 

500 or more beds ...................................................................................................................................... 210 ¥0.088 

Rural hospitals .................................................................................................................................................. 760 0.269 

0–49 beds .................................................................................................................................................. 251 0.453 

50–99 beds ................................................................................................................................................ 299 0.250 

100–149 beds ............................................................................................................................................ 123 0.075 

150–199 beds ............................................................................................................................................ 49 0.044 

200 or more beds ...................................................................................................................................... 38 0.126 

By Region: 

Urban By Region .............................................................................................................................................. 2,328 0.088 

New England ............................................................................................................................................. 116 0.045 

Middle Atlantic ........................................................................................................................................... 306 ¥0.057 

South Atlantic ............................................................................................................................................ 389 0.038 

East North Central ..................................................................................................................................... 376 0.106 

East South Central .................................................................................................................................... 139 0.042 

West North Central .................................................................................................................................... 154 0.366 

West South Central ................................................................................................................................... 332 0.178 

Mountain .................................................................................................................................................... 157 0.048 

Pacific ........................................................................................................................................................ 359 0.093 

Rural By Region ............................................................................................................................................... 760 0.269 

New England ............................................................................................................................................. 20 0.384 

Middle Atlantic ........................................................................................................................................... 55 0.170 

South Atlantic ............................................................................................................................................ 123 0.330 

East North Central ..................................................................................................................................... 114 0.281 

East South Central .................................................................................................................................... 135 0.269 

West North Central .................................................................................................................................... 93 0.333 

West South Central ................................................................................................................................... 140 0.162 

Mountain .................................................................................................................................................... 56 0.346 

Pacific ........................................................................................................................................................ 24 0.228 

By MCR Percent 

0–25 .................................................................................................................................................................. 395 0.146 


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IMPACT ANALYSIS OF BASE OPERATING DRG PAYMENT AMOUNT PROPOSED CHANGES RESULTING FROM THE FY 2016 

HOSPITAL VBP PROGRAM—Continued 

Number of 

hospitals 

Average 

percentage 

change 

25–50 ................................................................................................................................................................ 1,972 0.098 

50–65 ................................................................................................................................................................ 558 0.167 

Over 65 ............................................................................................................................................................. 93 0.305 

Missing .............................................................................................................................................................. 70 0.506 

By DSH Percent: 

0–25 .................................................................................................................................................................. 1,477 0.248 

25–50 ................................................................................................................................................................ 1,329 0.061 

50–65 ................................................................................................................................................................ 138 ¥0.163 

Over 65 ............................................................................................................................................................. 144 ¥0.115 

By Teaching Status: 

Non-Teaching ................................................................................................................................................... 2,085 0.209 

Teaching ........................................................................................................................................................... 1,003 ¥0.028 

Actual FY 2016 program year’s TPSs will 

not be reviewed and corrected by hospitals 

until after the FY 2016 IPPS/LTCH PPS final 

rule has been published. Therefore, the same 

historical universe of eligible hospitals and 

corresponding TPSs from the FY 2015 

program year will be used for the updated 

impact analysis in that final rule. 

6. Effects of Proposed Changes to the HAC 

Reduction Program for FY 2016 

In section IV.G. of the preamble of this 

proposed rule, we discuss the proposed 

changes to the HAC Reduction Program for 

FY 2016. We note that section 3008 of the 

Affordable Care Act added section 1886(p) to 

the Act to provide an incentive for certain 

hospitals to reduce the incidence of HACs. 

Section 1886(p) of the Act requires the 

Secretary to make an adjustment to payments 

to ‘‘applicable hospitals’’ effective beginning 

on October 1, 2014 and for subsequent 

program years. We refer readers to section 

V.I.1.a. of the FY 2014 IPPS/LTCH PPS final 

rule (78 FR 50707 through 50708) for a 

general overview of the HAC Reduction 

Program. For a further description of our 

policies for the HAC Reduction Program, we 

refer readers to the FY 2014 IPPS/LTCH PPS 

final rule (78 FR 50707 through 50729) and 

the FY 2015 IPPS/LTCH PPS final rule (79 FR 

50087 through 50104). These policies 

describe the general framework for 

implementation of the HAC Reduction 

Program including: (a) The relevant 

definitions applicable to the program; (b) the 

payment adjustment under the program; (c) 

the measure selection and conditions for the 

program, including a risk-adjustment and 

scoring methodology; (d) performance 

scoring; (e) the process for making hospitalspecific performance information available to 

the public, including the opportunity for a 

hospital to review the information and 

submit corrections; and (f) limitation of 

administrative and judicial review. We are 

not proposing any changes to these policies 

for the implementation of the FY 2016 HAC 

Reduction Program. 

We note that hospitals received a payment 

reduction for the first time in FY 2015. The 

table and analysis that we are presenting 

below are a simulation of the proposed FY 

2016 HAC Reduction Program using 

historical data. This table and analysis will 

be revised with updated available data in the 

FY 2016 IPPS/LTCH PPS final rule. We note 

that, as described earlier in this proposed 

rule, because scores will undergo 30-day 

review and correction by the hospitals that 

will not conclude until after the publication 

of the final rule, we will not provide 

hospital-level data or a hospital-level 

payment impact in conjunction with the FY 

2016 IPPS/LTCH PPS proposed or final rule. 

For FY 2016, we note that we finalized a 

Total HAC Score methodology in the FY 

2015 IPPS/LTCH PPS final rule (79 FR 50087 

through 50104) that assigns weights for 

Domain 1 and Domain 2 at 25 percent and 

75 percent, respectively. The table below 

presents data on the estimated proportion of 

hospitals in the worst-performing quartile of 

the Total HAC Score by hospital 

characteristic, based on this methodology. 

To estimate the impact of the FY 2016 HAC 

Reduction Program, we used the following: 

the AHRQ Patient Safety Indicator (PSI) 90 

measure results based on Medicare FFS 

discharges from July 2012 through June 2014 

and version 4.5a of the AHRQ software. For 

CDC Central Line-Associated Bloodstream 

Infection (CLABSI), Catheter-Associated 

Urinary Tract Infection (CAUTI), and Colon 

and Abdominal Hysterectomy Surgical Site 

Infection (SSI) measure results, the following 

was used: The standardized infection ratios 

(SIRs) calculated with hospital surveillance 

data reported to the National Healthcare 

Safety Network (NHSN) for infections 

occurring between January 2012 and 

December 2013. We used the FY 2015 Final 

Impact File to analyze the results by hospital 

characteristic. 

Of the 3,317 hospitals included in this 

analysis, 3,277 hospitals had information for 

geographic location, region, bed size, DSH 

percent, and teaching status; 3,233 had 

information for ownership; and 3,159 had 

information for Medicare days as a percent of 

total inpatient days (MCR percent). These 

differences in the number of hospitals listed 

for each characteristic are due to the source 

of the hospital characteristic data. Maryland 

hospitals are not included in the 

identification of the worst-performing 

quartile for the HAC Reduction Program in 

FY 2016 and, therefore, are not represented 

in the table below. 

The third column in the table indicates the 

percent of hospitals in each category of the 

specified characteristic. For example, within 

geographic region, 40.6 percent of hospitals 

(or 1,329 hospitals) are characterized as large 

urban, 33.9 percent of hospitals (or 1,110 

hospitals) are characterized as other urban, 

and 25.6 percent of hospitals (or 838 

hospitals) are characterized as rural. The fifth 

column in the table indicates the proportion 

of hospitals for each characteristic that we 

estimate will be in the worst-performing 

quartile of Total HAC Scores and will receive 

a payment reduction under the FY 2016 HAC 

Reduction Program. For example, with regard 

to geographic location, we estimate 20.8 

percent of hospitals (or 277 hospitals) 

characterized as large urban would be subject 

to a payment reduction; 20.1 percent of 

hospitals (or 223 hospitals) characterized as 

other urban would be subject to a payment 

reduction; and 15.9 percent of hospitals (or 

133 hospitals) characterized as rural would 

be subject to a payment reduction. 

With regard to geographic location of urban 

hospitals by bed size, 17.4 percent of 

hospitals (or 108 hospitals) characterized as 

urban hospitals with bed size of 1–99 beds 

would be subject to a payment adjustment; 

17.5 percent of hospitals (or 129 hospitals) 

characterized as urban hospitals with bed 

size of 100–199 beds would be subject to a 

payment adjustment; 19.1 percent of 

hospitals (or 85 hospitals) characterized as 

urban hospitals with bed size of 200–299 

beds would be subject to a payment 

adjustment; 22.9 percent of hospitals (or 62 

hospitals) characterized as urban hospitals 

with bed size of 300–399 beds would be 

subject to a payment adjustment; 33.1 

percent of hospitals (or 51 hospitals) 

characterized as urban hospitals with bed 

size of 400–499 beds would be subject to a 

payment adjustment; and 30.8 percent of 

hospitals (or 65 hospitals) characterized as 

urban hospitals with bed size of 500 or more 

beds would be subject to a payment 

adjustment. 

With regard to geographical location of 

rural hospitals by bed size, 19.6 percent of 

hospitals (or 64 hospitals) characterized as 

rural hospitals with bed size of 1–49 beds 

would be subject to a payment adjustment; 

14.0 percent of hospitals (or 42 hospitals) 


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characterized as rural hospitals with bed size 

of 50–99 beds would be subject to a payment 

adjustment; 9.7 percent of hospitals (or 12 

hospitals) characterized as rural hospitals 

with bed size of 100–149 beds would be 

subject to a payment adjustment; 8.2 percent 

of hospitals (or 4 hospitals) characterized as 

rural hospitals with bed size of 150–199 beds 

would be subject to a payment adjustment; 

and 28.2 percent of hospitals (or 11 hospitals) 

characterized as rural hospitals with bed size 

of 200 or more beds would be subject to a 

payment adjustment. 

With regard to region of urban hospitals, 

29.6 percent of hospitals (or 34 hospitals) 

characterized as urban in the New England 

region would be subject to a payment 

adjustment; 27.8 percent of hospitals (or 88 

hospitals) characterized as urban in the MidAtlantic region would be subject to a 

payment adjustment; 18.7 percent of 

hospitals (or 75 hospitals) characterized as 

urban in the South Atlantic region would be 

subject to a payment adjustment; 17.0 

percent of hospitals (or 66 hospitals) 

characterized as urban in the East North 

Central region would be subject to a payment 

adjustment; 15.5 percent of hospitals (or 23 

hospitals) characterized as urban in the East 

South Central region would be subject to a 

payment adjustment; 19.9 percent of 

hospitals (or 32 hospitals) characterized as 

urban in the West North Central region 

would be subject to a payment adjustment; 

15.4 percent of hospitals (or 57 hospitals) 

characterized as urban in the West South 

Central region would be subject to a payment 

adjustment; 25.6 percent of hospitals (or 42 

hospitals) characterized as urban in the 

Mountain region would be subject to a 

payment adjustment; and 22.2 percent of 

hospitals (or 83 hospitals) characterized as 

urban in the Pacific region would be subject 

to a payment adjustment. 

With regard to region of rural hospitals, 

40.0 percent of hospitals (or 8 hospitals) 

characterized as rural in the New England 

region would be subject to a payment 

adjustment; 16.4 percent of hospitals (or 9 

hospitals) characterized as rural in the MidAtlantic region would be subject to a 

payment adjustment; 12.6 percent of 

hospitals (or 16 hospitals) characterized as 

rural in the South Atlantic region would be 

subject to a payment adjustment; 14.9 

percent of hospitals (or 17 hospitals) 

characterized as rural in the East North 

Central region would be subject to a payment 

adjustment; 8.9 percent of hospitals (or 14 

hospitals) characterized as rural in the East 

South Central region would be subject to a 

payment adjustment; 23.1 percent of 

hospitals (or 24 hospitals) characterized as 

rural in the West North Central region would 

be subject to a payment adjustment; 16.5 

percent of hospitals (or 27 hospitals) 

characterized as rural in the West South 

Central region would be subject to a payment 

adjustment; 18.6 percent of hospitals (or 13 

hospitals) characterized as rural in the 

Mountain region would be subject to a 

payment adjustment; and 19.2 percent of 

hospitals (or 5 hospital) characterized as 

rural in the Pacific region would be subject 

to a payment adjustment. 

With regard to the DSH percent 

characteristic, 18.2 percent of hospitals (or 

289 hospitals) characterized in the 0–24 DSH 

percent would be subject to a payment 

adjustment; 18.8 percent of hospitals (or 258 

hospitals) characterized in the 25–49 DSH 

percent would be subject to a payment 

adjustment; 26.8 percent of hospitals (or 41 

hospitals) characterized in the 50–64 DSH 

percent would be subject to a payment 

adjustment; and 27.4 percent of hospitals (or 

45 hospitals) characterized in the 65 and over 

DSH percent would be subject to a payment 

adjustment. 

With regard to the teaching status 

characteristic, 16.2 percent of hospitals (or 

366 hospitals) characterized as nonteaching 

would be subject to a payment adjustment; 

21.4 percent of hospitals (or 165 hospitals) 

characterized as fewer than 100 residents 

would be subject to a payment adjustment; 

and 42.3 percent of hospitals (or 102 

hospitals) characterized as 100 or more 

residents would be subject to a payment 

adjustment. 

With regard to the urban teaching and DSH 

characteristic, 28.4 percent of hospitals (or 

235 hospitals) characterized as teaching and 

DSH would be subject to a payment 

adjustment; 18.9 percent of hospitals (or 24 

hospitals) characterized as teaching and no 

DSH would be subject to a payment 

adjustment; 15.2 percent of hospitals (or 161 

hospitals) characterized as no teaching and 

DSH would be subject to a payment 

adjustment; 18.7 percent of hospitals (or 80 

hospitals) characterized as no teaching and 

no DSH would be subject to a payment 

adjustment; and 15.9 percent of hospitals (or 

133 hospitals) characterized as nonurban 

would be subject to a payment adjustment. 

With regard to the type of ownership 

characteristic, 19.8 percent of hospitals (or 

371 hospitals) characterized as voluntary 

would be subject to a payment adjustment; 

15.1 percent of hospitals (or 128 hospitals) 

characterized as proprietary would be subject 

to a payment adjustment; and 22.4 percent of 

hospitals (or 115 hospitals) characterized as 

government would be subject to a payment 

adjustment. 

With regard to the MCR percent 

characteristic, 27.4 percent of hospitals (or 

119 hospitals) characterized in the 0–24 MCR 

percent would be subject to a payment 

adjustment; 19.1 percent of hospitals (or 386 

hospitals) characterized in the 25–49 MCR 

percent would be subject to a payment 

adjustment; 14.4 percent of hospitals (or 84 

hospitals) characterized in the 50–64 MCR 

percent would be subject to a payment 

adjustment; and 7.0 percent of hospitals (or 

8 hospitals) characterized in the 65 and over 

MCR percent would be subject to a payment 

adjustment. 

ESTIMATED PROPORTION OF HOSPITALS IN THE WORST-PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC 

SCORE FOR THE FY 2016 HAC REDUCTION PROGRAM

[By hospital characteristic] 

Hospital characteristic Number of 

hospitals a Percent b

Number of 

hospitals in 

the worstperforming 

quartile 

Percent of 

hospitals in 

the worstperforming 

quartile c

Total d ............................................................................................................... 3,317 100 644 19.4 

By Geographic Location: 

All hospitals: 

Large urban e ............................................................................................ 1,329 40.6 277 20.8 

Other urban .............................................................................................. 1,110 33.9 223 20.1 

Rural ......................................................................................................... 838 25.6 133 15.9

Urban hospitals: 

1–99 beds ................................................................................................. 620 25.4 108 17.4 

100–199 beds ........................................................................................... 738 30.3 129 17.5 

200–299 beds ........................................................................................... 445 18.2 85 19.1 

300–399 beds ........................................................................................... 271 11.1 62 22.9 

400–499 .................................................................................................... 154 6.3 51 33.1 

500 or more beds ..................................................................................... 211 8.7 65 30.8 

Rural hospitals: 

1–49 beds ................................................................................................. 326 38.9 64 19.6 

50–99 beds ............................................................................................... 300 35.8 42 14.0 

100–149 beds ........................................................................................... 124 14.8 12 9.7 

150–199 beds ........................................................................................... 49 5.8 4 8.2 


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ESTIMATED PROPORTION OF HOSPITALS IN THE WORST-PERFORMING QUARTILE (>75TH PERCENTILE) OF THE TOTAL HAC 

SCORE FOR THE FY 2016 HAC REDUCTION PROGRAM—Continued 

[By hospital characteristic] 

Hospital characteristic Number of 

hospitals a Percent b

Number of 

hospitals in 

the worstperforming 

quartile 

Percent of 

hospitals in 

the worstperforming 

quartile c

200 or more beds ..................................................................................... 39 4.7 11 28.2 

By Region: 

Urban by region: 

New England ............................................................................................ 115 4.7 34 29.6 

Mid-Atlantic ............................................................................................... 316 13.0 88 27.8 

South Atlantic ........................................................................................... 401 16.4 75 18.7 

East North Central .................................................................................... 389 15.9 66 17.0 

East South Central ................................................................................... 148 6.1 23 15.5 

West North Central ................................................................................... 161 6.6 32 19.9 

West South Central .................................................................................. 371 15.2 57 15.4 

Mountain ................................................................................................... 164 6.7 42 25.6 

Pacific ....................................................................................................... 374 15.3 83 22.2 

Rural by region: 

New England ............................................................................................ 20 2.4 8 40.0 

Mid-Atlantic ............................................................................................... 55 6.6 9 16.4 

South Atlantic ........................................................................................... 127 15.2 16 12.6 

East North Central .................................................................................... 114 13.6 17 14.9 

East South Central ................................................................................... 158 18.9 14 8.9 

West North Central ................................................................................... 104 12.4 24 23.1 

West South Central .................................................................................. 164 19.6 27 16.5 

Mountain ................................................................................................... 70 8.4 13 18.6 

Pacific ....................................................................................................... 26 3.1 5 19.2 

By DSH Percent f

0–24 .......................................................................................................... 1,584 48.3 289 18.2 

25–49 ........................................................................................................ 1,376 42.0 258 18.8 

50–64 ........................................................................................................ 153 4.7 41 26.8 

65 and over .............................................................................................. 164 5.0 45 27.4 

By Teaching Status: g

Non-teaching ............................................................................................ 2,265 69.1 366 16.2 

Fewer than 100 residents ......................................................................... 771 23.5 165 21.4 

100 or more residents .............................................................................. 241 7.4 102 42.3 

By Urban Teaching and DSH f g

Teaching and DSH ................................................................................... 827 25.2 235 28.4 

Teaching and no DSH .............................................................................. 127 3.9 24 18.9 

No teaching and DSH .............................................................................. 1,058 32.3 161 15.2 

No teaching and no DSH ......................................................................... 427 13.0 80 18.7 

Non-urban ................................................................................................. 838 25.6 133 15.9 

By Type of Ownership: 

Voluntary ................................................................................................... 1,873 57.9 371 19.8

Proprietary ................................................................................................ 846 26.2 128 15.1 

Government .............................................................................................. 514 15.9 115 22.4 

By MCR Percent: 

0–24 .......................................................................................................... 435 13.8 119 27.4

25–49 ........................................................................................................ 2,026 64.1 386 19.1 

50–64 ........................................................................................................ 584 18.5 84 14.4 

65 and over .............................................................................................. 114 3.6 8 7.0 

Source: FY 2016 HAC Reduction Program Proposed Rule Results provided by R&A contract. Scores are based on AHRQ PSI 90 data from

July 2012 through June 2014 and CLABSI, CAUTI, and SSI results from January 2012 to December 2013. Hospital Characteristics are based on 

the FY 2015 Final Impact File last updated on September 30, 2014. 

Notes: 

aThe total number of hospitals with hospital characteristic data (3,277 for geographic location, bed size, and teaching status; 3,233 for type of 

ownership; and 3,159 for MCR) do not add up to the total number of hospitals we estimate would be eligible for the FY 2016 HAC Reduction 

Program (3,317) because 40 hospitals are not included in the FY 2015 Final Impact File and not all hospitals have data for all characteristics. bThis column is the percent of all hospitals with each characteristic that we estimate would be eligible for the FY 2016 HAC Reduction Program and are included in the FY 2015 Final Impact File. Percentages may not sum to 100 due to rounding. cThis column is the percent of hospitals within each characteristic that we estimate would be in the worst-performing quartile. 

dTotal excludes the 46 Maryland hospitals. 

e Large urban hospitals are hospitals located in large urban areas with populations over 1 million. 

fA hospital is considered to be a DSH hospital if it has a DSH patient percentage greater than zero. 

gA hospital is considered to be a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP) greater than zero. 


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24674 Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 

7. Effects of Proposed Elimination of 

Simplified Cost Allocation Methodology 

Used by Hospitals 

In section IV.H. of the preamble of this 

proposed rule, we discuss our proposal to 

amend the regulations at 42 CFR 

412.302(d)(4) to limit a hospital’s ability to 

elect the simplified cost allocation 

methodology under the terms and conditions 

provided in the instructions for CMS Form 

2552 to cost reporting periods beginning 

before October 1, 2015. We are proposing to 

limit the election of the simplified cost 

allocation methodology because the 

allocation of the costs of capital-related 

movable equipment using this methodology 

yields less precise calculated CCRs. 

Furthermore, we believe that advances in 

technology have reduced the cost of 

recordkeeping, which has allowed hospitals 

to maintain accurate statistical data and 

afforded them the flexibility to change to a 

more precise allocation methodology. 

Although these proposed changes would 

impact some small rural hospitals, including 

CAHs, the vast majority of hospitals do not 

use the simplified cost allocation 

methodology. Based on FY 2013 data, only 9 

of 1,269 CAHs and 23 of 4,389 hospitals 

other than CAHs used the simplified cost 

allocation methodology. In addition, when 

the simplified cost allocation methodology 

was implemented in 1996, it was expected 

that it also would likely result in reduced 

Medicare payments to hospitals. We believe 

that the proposed changes would not have a 

significant impact on the operations of a 

substantial number of small rural hospitals. 

We also do not believe that the proposed 

changes would affect beneficiary access to 

care, as affected hospitals will continue to be 

paid for services provided to Medicare 

beneficiaries. 

We are inviting public comments on this 

analysis of impact. 

8. Effects of Implementation of Rural 

Community Hospital Demonstration Program 

In section IV.I. of the preamble of this 

proposed rule, for FY 2016, we discuss our 

implementation of section 410A of Public 

Law 108–173, as amended, which requires 

the Secretary to conduct a demonstration that 

would modify reimbursement for inpatient 

services for up to 30 rural community 

hospitals. Section 410A(c)(2) requires that in 

conducting the demonstration program under 

this section, the Secretary shall ensure that 

the aggregate payments made by the 

Secretary do not exceed the amount which 

the Secretary would have paid if the 

demonstration program under this section 

was not implemented. As discussed in 

section IV.I. of the preamble of this proposed 

rule, in the IPPS final rules for each of the 

previous 11 fiscal years, we have estimated 

the additional payments made by the 

program for each of the participating 

hospitals as a result of the demonstration. In 

order to achieve budget neutrality, we are 

proposing to adjust the national IPPS rates by 

an amount sufficient to account for the added 

costs of this demonstration. In other words, 

we are proposing to apply budget neutrality 

across the payment system as a whole rather 

than across the participants of this 

demonstration. The language of the statutory 

budget neutrality requirement permits the 

agency to implement the budget neutrality 

provision in this manner. The statutory 

language requires that aggregate payments 

made by the Secretary do not exceed the 

amount which the Secretary would have paid 

if the demonstration was not implemented 

but does not identify the range across which 

aggregate payments must be held equal. 

We are proposing to adjust the national 

IPPS rates according to the methodology set 

forth in section IV.I.2. of the preamble of this 

proposed rule. We note that the phase-out of 

the demonstration has begun with the 7 ‘‘preexpansion’’ participating hospitals that were 

selected for the demonstration during 2004 

and 2008 concluding their participation 

during FY 2015. Therefore, we are proposing 

that the financial experience of these 

hospitals not be included in the estimated 

demonstration cost for FY 2016. Of the 15 

hospitals that were selected in 2011 as a 

result of the expansion of the demonstration 

under the Affordable Care Act, 11 hospitals 

are scheduled to end their participation in 

the demonstration during FY 2016. Eight of 

these 11 hospitals are scheduled to end their 

participation in the demonstration prior to 

September 30, 2016. For each of these 8 

hospitals, we are proposing to estimate the 

reasonable cost amount and the amount that 

would otherwise be paid without the 

demonstration for FY 2016 on a prorated 

basis, multiplying the estimated amounts for 

each hospital (as derived from ‘‘as 

submitted’’ cost reports for cost reporting 

periods ending in CY 2013) by the fraction 

of the number of months that it will 

participate in the demonstration during FY 

2016 in relation to the total 12-month period. 

Accordingly, the proposed budget neutrality 

offset amount used to determine the 

proposed adjustment to the national IPPS 

rates to account for estimated demonstration 

costs for FY 2016 for these 15 hospitals is 

$26,195,949. In addition, in this proposed 

rule, we are proposing to subtract from the 

budget neutrality offset amount for FY 2016 

the amount by which the budget neutrality 

offset amount that was finalized in the FY 

2009 IPPS/LTCH PPS final rule exceeds the 

actual costs of the demonstration for FY 2009 

(as shown in the finalized cost reports for 

cost reporting periods beginning in FY 2009) 

($8,457,452). Therefore, the resulting total 

($17,738,497) is the amount for which a 

proposed adjustment to the IPPS rates for FY 

2016 would be calculated. 

9. Effects of the Proposed Changes to MS– 

DRGs Subject to the Postacute Care Transfer 

Policy and the Special Payment Policy 

In section IV.J. of the preamble to this 

proposed rule, we discuss proposed changes 

to the list of MS–DRGs subject to the 

postacute care transfer policy and the DRG 

special payment policy. As reflected in Table 

5 listed in section VI. of the Addendum to 

this proposed rule (which is available via the 

Internet on the CMS Web site), using criteria 

set forth in regulations at § 412.4, we 

evaluated MS–DRG charge, discharge, and 

transfer data to determine which MS–DRGs 

qualify for the postacute care transfer and 

DRG special payment policies. We note that 

we are not proposing to make any changes in 

these payment policies in this FY 2016 

proposed rule. We are proposing to include 

two proposed new MS–DRGs on the list of 

MS–DRGs subject to the postacute care 

transfer policy and the DRG special payment 

policy as a result of our proposals to revise 

the MS–DRG classifications for FY 2016. 

Specifically, we are proposing that two 

proposed new MS–DRGs would qualify for 

the postacute care transfer policy and the 

DRG special payment policy in FY 2016. 

Column 4 of Table I in this Appendix A 

shows the effects of the proposed changes to 

the MS–DRGs and the relative payment 

weights and the application of the 

recalibration budget neutrality factor to the 

standardized amounts. Section 

1886(d)(4)(C)(i) of the Act requires us 

annually to make appropriate DRG 

classification changes in order to reflect 

changes in treatment patterns, technology, 

and any other factors that may change the 

relative use of hospital resources. The 

analysis and methods for determining the 

proposed changes due to the MS–DRGs and 

relative payment weights account for and 

include changes in the status of MS–DRG 

postacute care transfer and special payment 

policies. We refer readers to section I.G. of 

this Appendix A for a detailed discussion of 

payment impacts due to MS–DRG 

reclassification policies. 

I. Effects of Proposed Changes in the Capital 

IPPS 

1. General Considerations 

For the impact analysis presented below, 

we used data from the December 2014 update 

of the FY 2014 MedPAR file and the 

December 2014 update of the ProviderSpecific File (PSF) that is used for payment 

purposes. Although the analyses of the 

proposed changes to the capital prospective 

payment system do not incorporate cost data, 

we used the December 2014 update of the 

most recently available hospital cost report 

data (FYs 2012 and 2013) to categorize 

hospitals. Our analysis has several 

qualifications. We use the best data available 

and make assumptions about case-mix and 

beneficiary enrollment as described below. 

Due to the interdependent nature of the 

IPPS, it is very difficult to precisely quantify 

the impact associated with each proposed 

change. In addition, we draw upon various 

sources for the data used to categorize 

hospitals in the tables. In some cases (for 

instance, the number of beds), there is a fair 

degree of variation in the data from different 

sources. We have attempted to construct 

these variables with the best available 

sources overall. However, it is possible that 

some individual hospitals are placed in the 

wrong category. 

Using cases from the December 2014 

update of the FY 2014 MedPAR file, we 

simulated payments under the capital IPPS 

for FY 2015 and FY 2016 for a comparison 

of total payments per case. Any short-term, 

acute care hospitals not paid under the 

general IPPS (for example, Indian Health 

Service hospitals and hospitals in Maryland) 

are excluded from the simulations. 

The methodology for determining a capital 

IPPS payment is set forth at § 412.312. The 

basic methodology for calculating the 


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proposed capital IPPS payments in FY 2016 

is as follows: 

(Standard Federal Rate) × (DRG weight) × 

(GAF) × (COLA for hospitals located in 

Alaska and Hawaii) × (1 + DSH 

Adjustment Factor + IME adjustment 

factor, if applicable). 

In addition to the other adjustments, 

hospitals may receive outlier payments for 

those cases that qualify under the threshold 

established for each fiscal year. We modeled 

payments for each hospital by multiplying 

the capital Federal rate by the GAF and the 

hospital’s case-mix. We then added estimated 

payments for indirect medical education, 

disproportionate share, and outliers, if 

applicable. For purposes of this impact 

analysis, the model includes the following 

assumptions: 

• We estimate that the Medicare case-mix 

index will increase by 0.5 percent in both 

FYs 2015 and 2016. 

• We estimate that Medicare discharges 

will be approximately 11.2 million in FY 

2015 and 11.3 million in FY 2016. 

• The capital Federal rate was updated 

beginning in FY 1996 by an analytical 

framework that considers changes in the 

prices associated with capital-related costs 

and adjustments to account for forecast error, 

changes in the case-mix index, allowable 

changes in intensity, and other factors. As 

discussed in section III.A.1.a. of the 

Addendum to this proposed rule, the 

proposed update is 1.3 percent for FY 2016. 

• In addition to the proposed FY 2016 

update factor, the proposed FY 2016 capital 

Federal rate was calculated based on a 

proposed GAF/DRG budget neutrality 

adjustment factor of 0.9976 and a proposed 

outlier adjustment factor of 0.9357. As 

discussed in section VI.C. of the preamble of 

this proposed rule, we are not proposing to 

make an additional MS–DRG documentation 

and coding adjustment to the capital IPPS 

Federal rates for FY 2016. 

2. Results 

We used the actuarial model described 

above to estimate the potential impact of our 

proposed changes for FY 2016 on total 

capital payments per case, using a universe 

of 3,366 hospitals. As described above, the 

individual hospital payment parameters are 

taken from the best available data, including 

the December 2014 update of the FY 2014 

MedPAR file, the December 2014 update to 

the PSF, and the most recent cost report data 

from the December 2014 update of HCRIS. In 

Table III, we present a comparison of 

estimated total payments per case for FY 

2015 and estimated total payments per case 

for FY 2016 based on the proposed FY 2016 

payment policies. Column 2 shows estimates 

of payments per case under our model for FY 

2015. Column 3 shows estimates of payments 

per case under our model for FY 2016. 

Column 4 shows the proposed total 

percentage change in payments from FY 2015 

to FY 2016. The proposed change 

represented in Column 4 includes the 

proposed 1.3 percent update to the capital 

Federal rate and other proposed changes in 

the adjustments to the capital Federal rate. 

The comparisons are provided by: (1) 

geographic location; (2) region; and (3) 

payment classification. 

The simulation results show that, on 

average, proposed capital payments per case 

in FY 2016 are expected to increase as 

compared to capital payments per case in FY 

2015. This expected increase is due to the 

proposed approximately 0.8 percent increase 

in the capital Federal rate for FY 2016 as 

compared to the FY 2015 capital Federal rate 

and, to a lesser degree, proposed changes to 

the MS–DRG reclassifications and 

recalibrations and proposed changes in 

outlier payments. (For a discussion of the 

determination of the capital Federal rate, we 

refer readers to section III.A. of the 

Addendum to this proposed rule.) Overall, 

across all hospitals, the proposed changes to 

the GAFs are expected to slightly increase 

capital payments. However, regionally, the 

effects of the proposed changes to the GAFs 

on capital payments are consistent with the 

projected changes in payments due to 

proposed changes in the wage index (and 

proposed policies affecting the wage index) 

as shown in Table I in section I.G. of this 

Appendix. 

The increase in capital payments per case 

due to the effects of proposed changes to the 

MS–DRG reclassifications and recalibrations 

is expected to be slightly greater for urban 

hospitals, as are the increases in capital 

payments per case due to proposed changes 

in outlier payments. However, most of the 

urban and rural areas would experience an 

offset to the projected increase in capital 

payments per case due to the effects of 

proposed changes to the GAFs. 

The net impact of these proposed changes 

is an estimated 2.0 percent change in capital 

payments per case from FY 2015 to FY 2016 

for all hospitals (as shown below in Table 

III). 

The geographic comparison shows that, on 

average, hospitals in all classifications (urban 

and rural) would experience an increase in 

capital IPPS payments per case in FY 2016 

as compared to FY 2015. Capital IPPS 

payments per case for hospitals in ‘‘large 

urban areas’’ have an estimated increase of 

2.2 percent, while hospitals in rural areas, on 

average, are expected to experience a 0.9 

percent increase in capital payments per case 

from FY 2015 to FY 2016. Capital IPPS 

payments per case for ‘‘other urban 

hospitals’’ are estimated to increase 1.9 

percent. The primary factor contributing to 

the difference in the proposed projected 

increase in capital IPPS payments per case 

for urban hospitals as compared to rural 

hospitals is the proposed changes in the 

GAFs. Rural hospitals in all but two rural 

regions are projected to experience a decrease 

in capital payments due to the effect of 

proposed changes in the GAFs, while 

hospitals in only half of the urban regions are 

projected to experience a decrease in capital 

payments due to the effect of the proposed 

changes in the GAFs. 

The comparisons by region show that the 

estimated increases in capital payments per 

case from FY 2015 to FY 2016 in urban areas 

range from a 2.7 percent increase for the 

Pacific urban region to a 1.5 percent increase 

for the East South Central and New England 

urban regions, and a 0.5 percent increase for 

Puerto Rico. For rural regions, the Pacific 

rural region is projected to experience the 

largest increase in capital IPPS payments per 

case of 1.8 percent; the Middle Atlantic rural 

region is projected to experience the smallest 

increase in capital IPPS payments per case of 

0.3 percent; and the West South Central rural 

region is projected to have no change in 

capital payments per case in FY 2016 

compared to FY 2015 payments per case. In 

most urban and rural regions, proposed 

changes in the GAFs contribute to only a 

small projected increase in capital payments, 

for example, proposed changes in the GAFs 

are a major factor for the West South Central 

rural region, which is not expected to 

experience any increase in capital payments 

per case in FY 2016 compared to FY 2015. 

However, the proposed changes in the GAFs 

have the opposite effect for the Pacific urban 

and rural regions where they are a primary 

contributor to the expected larger than 

average increase in capital IPPS payments 

per case. 

Hospitals of all types of ownership (that is, 

voluntary hospitals, government hospitals, 

and proprietary hospitals) are expected to 

experience an increase in capital payments 

per case from FY 2015 to FY 2016. The 

proposed increase in capital payments for 

voluntary and proprietary hospitals is 

estimated to be 1.9 percent. For government 

hospitals, the proposed increase is estimated 

to be 2.1 percent. 

Section 1886(d)(10) of the Act established 

the MGCRB. Hospitals may apply for 

reclassification for purposes of the wage 

index for FY 2016. Reclassification for wage 

index purposes also affects the GAFs because 

that factor is constructed from the hospital 

wage index. To present the effects of the 

hospitals being reclassified as of the 

publication of this proposed rule for FY 

2016, we show the proposed average capital 

payments per case for reclassified hospitals 

for FY 2016. Urban reclassified hospitals are 

expected experience an increase in capital 

payments of 2.4 percent; urban 

nonreclassified hospitals are expected to 

experience an increase in capital payments of 

1.9 percent. The estimated percentage 

increase for rural reclassified hospitals is 1.3 

percent, and for rural nonreclassified 

hospitals, the estimated percentage increase 

is 0.8 percent. 


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TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE

[FY 2015 payments compared to proposed FY 2016 payments] 

Number of 

hospitals 

Average FY 2015 

payments/case 

Average proposed 

FY 2016 payments/case Change 

By Geographic Location: 

All hospitals ...................................................................... 3,366 873 890 2.0 

Large urban areas (populations over 1 million) ........ 1,390 965 986 2.2 

Other urban areas (populations of 1 million of 

fewer) ..................................................................... 1,140 836 851 1.9 

Rural areas ................................................................ 836 592 598 0.9 

Urban hospitals ................................................................. 2,530 906 925 2.0 

0–99 beds .................................................................. 666 738 749 1.5 

100–199 beds ............................................................ 777 791 806 1.8 

200–299 beds ............................................................ 446 830 847 1.9 

300–499 beds ............................................................ 428 921 941 2.1 

500 or more beds ...................................................... 213 1,081 1,105 2.2 

Rural hospitals .................................................................. 836 592 598 0.9 

0–49 beds .................................................................. 329 491 497 1.2 

50–99 beds ................................................................ 298 549 556 1.1 

100–149 beds ............................................................ 121 592 597 0.8 

150–199 beds ............................................................ 48 649 654 0.8 

200 or more beds ...................................................... 40 708 713 0.7 

By Region: 

Urban by Region .............................................................. 2,530 906 925 2.0 

New England ............................................................. 120 995 1,010 1.5 

Middle Atlantic ........................................................... 318 1,006 1,030 2.4 

South Atlantic ............................................................ 407 804 820 2.0 

East North Central ..................................................... 396 871 888 1.9 

East South Central .................................................... 150 770 782 1.5 

West North Central .................................................... 165 892 907 1.7 

West South Central ................................................... 382 823 838 1.9 

Mountain .................................................................... 161 937 955 1.9 

Pacific ........................................................................ 380 1,151 1,182 2.7 

Puerto Rico ................................................................ 51 399 402 0.5 

Rural by Region ................................................................ 836 592 598 0.9 

New England ............................................................. 22 818 822 0.6 

Middle Atlantic ........................................................... 55 581 583 0.3 

South Atlantic ............................................................ 128 555 563 1.4 

East North Central ..................................................... 116 617 625 1.2 

East South Central .................................................... 164 539 543 0.7 

West North Central .................................................... 101 638 645 1.1 

West South Central ................................................... 165 525 525 0.0 

Mountain .................................................................... 61 665 675 1.4 

Pacific ........................................................................ 24 772 786 1.8 

By Payment Classification: 

All hospitals ...................................................................... 3,366 873 890 2.0 

Large urban areas (populations over 1 million) ............... 1,383 966 987 2.2 

Other urban areas (populations of 1 million of fewer) ..... 1,096 840 856 1.9 

Rural areas ....................................................................... 887 605 610 0.8 

Teaching Status: 

Non-teaching ............................................................. 2,325 741 754 1.7 

Fewer than 100 Residents ........................................ 794 850 867 1.9 

100 or more Residents .............................................. 247 1,231 1,260 2.4 

Urban DSH: 

100 or more beds ............................................... 1,572 929 949 2.1 

Less than 100 beds ........................................... 333 665 677 1.8 

Rural DSH: 

Sole Community (SCH/EACH) ........................... 253 558 566 1.3 

Referral Center (RRC/EACH) ............................ 220 663 667 0.7 

Other Rural: 

100 or more beds ....................................... 33 586 577 ¥1.4 

Less than 100 beds .................................... 275 488 494 1.1 

Urban teaching and DSH: 

Both teaching and DSH ............................................ 846 1,004 1,026 2.2 

Teaching and no DSH ............................................... 132 915 931 1.8 

No teaching and DSH ............................................... 1,059 780 795 1.9 

No teaching and no DSH .......................................... 442 807 823 1.9 

Rural Hospital Types: 

Non special status hospitals ..................................... 2,701 901 920 2.1 

RRC/EACH ................................................................ 211 728 735 1.0 

SCH/EACH ................................................................ 327 666 674 1.3 

SCH, RRC and EACH ............................................... 125 725 733 1.2 


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TABLE III—COMPARISON OF TOTAL PAYMENTS PER CASE—Continued 

[FY 2015 payments compared to proposed FY 2016 payments] 

Number of 

hospitals 

Average FY 2015 

payments/case 

Average proposed 

FY 2016 payments/case Change 

Hospitals Reclassified by the Medicare Geographic Classification Review Board: 

FY2016 Reclassifications: 

All Urban Reclassified ............................................... 585 926 949 2.4 

All Urban Non-Reclassified ....................................... 1,894 903 920 1.9 

All Rural Reclassified ................................................ 276 627 636 1.3 

All Rural Non-Reclassified ........................................ 505 544 548 0.8 

Other Reclassified Hospitals (Section 1886(d)(8)(B)) 48 597 586 ¥1.8 

Type of Ownership: 

Voluntary ................................................................... 1,934 886 903 1.9 

Proprietary ................................................................. 880 788 802 1.9 

Government ............................................................... 529 918 938 2.1 

Medicare Utilization as a Percent of Inpatient Days: 

0–25 ........................................................................... 713 979 1,000 2.2 

25–50 ......................................................................... 2,110 874 891 1.9 

50–65 ......................................................................... 332 739 752 1.7 

Over 65 ...................................................................... 66 758 774 2.1 

J. Effects of Proposed Payment Rate Changes 

and Policy Changes Under the LTCH PPS 

1. Introduction and General Considerations 

In section VII. of the preamble of this 

proposed rule and section V. of the 

Addendum to this proposed rule, we set forth 

the proposed annual update to the payment 

rates for the LTCH PPS for FY 2016. In the 

preamble of this proposed rule, we specify 

the statutory authority for the proposed 

provisions that are presented, identify those 

proposed policies, and present rationales for 

our proposed decisions as well as 

alternatives that were considered. In this 

section of Appendix A to this proposed rule, 

we discuss the impact of the proposed 

changes to the payment rate, factors, and 

other payment rate policies related to the 

LTCH PPS that are presented in the preamble 

of this proposed rule in terms of their 

estimated fiscal impact on the Medicare 

budget and on LTCHs. 

There are 418 LTCHs included in this 

impacts analysis, which includes data for 78 

nonprofit (voluntary ownership control) 

LTCHs, 326 proprietary LTCHs, and 14 

LTCHs that are government-owned and 

operated. (We note that, although there are 

currently approximately 430 LTCHs, for 

purposes of this impact analysis, we 

excluded the data of all inclusive rate 

providers and the LTCHs that are paid in 

accordance with demonstration projects, 

consistent with the development of the 

proposed FY 2016 MS–LTC–DRG relative 

weights (discussed in section VII.C.3.c. of the 

preamble of this proposed rule)). In the 

impact analysis, we used the proposed 

payment rate, factors, and policies presented 

in this proposed rule, including the proposed 

application of the new site neutral payment 

rate required by section 1886(m)(6)(A) of the 

Act (discussed in section VII.B. of the 

preamble of this proposed rule), the proposed 

1.9 percent annual update to the LTCH PPS 

standard Federal payment rate in accordance 

with section 1886(m)(5)(C) of the Act (which 

is based on the full estimated increase of the 

proposed LTCH PPS market basket and the 

reductions required by sections 1886(m)(3) 

and (m)(4) of the Act), the proposed update 

to the MS–LTC–DRG classifications and 

relative weights for the LTCH PPS standard 

Federal payment rate cases, the proposed 

update to the wage index values and laborrelated share for the LTCH PPS standard 

Federal payment rate cases, and the best 

available claims and CCR data to estimate the 

proposed change in payments for FY 2016. 

Under the new statutory dual-rate LTCH 

PPS structure, there will be two distinct 

payment rates for LTCH discharges beginning 

in FY 2016. Under this statutory change, as 

discussed in section VII.B. of the preamble of 

this proposed rule, we are proposing to 

provide payment for LTCH discharges that 

meet the criteria for exclusion from site 

neutral payment rate (that is, LTCH PPS 

standard Federal payment rate cases) based 

on the LTCH PPS standard Federal payment 

rate. In addition, consistent with the statute, 

we are proposing that the site neutral 

payment rate is the lower of the IPPS 

comparable per diem amount as determined 

under § 412.529(d)(4), including any 

applicable outlier payments as specified in 

§ 412.525(a); or 100 percent of the estimated 

cost of the case as determined under existing 

§ 412.529(d)(2). In addition, under our 

proposals, there would be two separate HCO 

targets—one for LTCH PPS standard Federal 

payment rate cases and one for site neutral 

payment rate cases. The statute also 

establishes a transitional payment method for 

cases that will be paid the site neutral 

payment rate for LTCH discharges occurring 

in cost reporting periods beginning during 

FY 2016 or FY 2017. As discussed more fully 

in section VII.B.4.b. of the preamble of this 

proposed rule, the transitional payment 

amount for site neutral payment rate cases is 

a blended payment rate, which would be 

calculated as 50 percent of the applicable site 

neutral payment rate amount for the 

discharge as determined under proposed new 

§ 412.522(c)(1) and 50 percent of the 

applicable LTCH PPS standard Federal 

payment rate for the discharge determined 

under § 412.523. 

Based on the best available data for the 418 

LTCHs in our database that were considered 

in the analyses used for this proposed rule, 

we estimate that overall LTCH PPS payments 

in FY 2016 would decrease by approximately 

4.6 percent (or about $251 million). This 

projection takes into account estimated 

payments for LTCH cases that would have 

met the new statutory patient-level criteria 

and been paid the LTCH PPS standard 

Federal payment rate if that rate had been in 

effect at the time of the discharge, and 

estimated payments for LTCH cases that 

would not have met those new statutory 

patient-level criteria and been paid under the 

site neutral payment rate if that rate had been 

in effect at the time of the discharge 

described below. 

Because the statute specifies that the site 

neutral payment rate effective date for a 

given LTCH is determined based on the date 

on which that LTCH’s cost reporting period 

begins on or after October 1, 2015, our 

estimate of FY 2016 LTCH PPS payments for 

site neutral payment rate cases includes an 

adjustment to account for this rolling 

effective date. Our proposed approach, 

applied to the FY 2014 data that were used 

for the analyses in this proposed rule, 

accounts for the fact that LTCHs with cost 

reporting periods that begin after October 1, 

2015, will continue to be paid for all 

discharges (including those that do not meet 

the patient-level criteria for exclusion from 

the site neutral payment rate) at the LTCH 

PPS standard Federal payment rate until the 

start of their first cost reporting period 

beginning after October 1, 2015. Therefore, in 

order to estimate total LTCH PPS payments 

for site neutral payment rate cases in FY 

2016, we first identified LTCHs with cost 

reporting periods that would begin in the 

first quarter of FY 2016 (that is, October 

through December 2015), and modeled those 

LTCHs estimated FY 2016 site neutral 

payment rate payments based on the 

proposed transitional blended payment rate. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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We then modeled the estimated first quarter 

FY 2016 payments to LTCHs with cost 

reporting periods that would begin after the 

first quarter of FY 2016 using the LTCH PPS 

standard Federal payment rate. We then 

identified the LTCHs with cost reporting 

periods that would begin in each of the 

remaining three quarters of FY 2016, and 

applied an analogous analysis to estimate 

payments in each respective quarter of FY 

2016. (For full details on our proposed 

method of estimating payments under our 

proposals for FY 2016, we refer readers to the 

description presented in section V.D.4. of the 

Addendum to this proposed rule.) We believe 

that this approach is a reasonable means of 

taking the rolling effective date into account 

when estimating FY 2016 payments. 

Based on the FY 2014 LTCH cases that 

were used for the analyses in this proposed 

rule, approximately 46 percent of LTCH cases 

would have been classified as site neutral 

payment rate cases if the site neutral 

payment rate had been in effect in FY 2014 

(that is, 46 percent of such LTCH cases 

would not have met the patient-level criteria 

for exclusion from the site neutral payment 

rate). Our Office of the Actuary estimates that 

the percent of LTCH PPS cases that will be 

paid at the site neutral payment rate in FY 

2016 will not change significantly from the 

historical data. Taking into account the 

proposed transitional blended payment rate 

and other proposed policies applicable to the 

site neutral payment rate cases in FY 2016, 

and our approach to account for the rolling 

effective date for the new site neutral 

payment rate, we estimate that aggregate 

LTCH PPS payments for these site neutral 

payment rate cases will decrease by 

approximately 14.3 percent (or about $293 

million). 

Approximately 54 percent of LTCH cases 

are expected to meet the patient-level criteria 

for exclusion from the site neutral payment 

rate in FY 2016, and be paid based on the 

LTCH PPS standard Federal payment rate for 

the full year. We estimate that total LTCH 

PPS payments for these LTCH PPS standard 

Federal payment rate cases in FY 2016 would 

increase approximately 1.2 percent (or 

approximately $42 million). This estimated 

increase in LTCH PPS payments for LTCH 

PPS standard Federal payment rate cases in 

FY 2016 is primarily a result of the proposed 

1.9 percent annual update to the LTCH PPS 

standard Federal payment rate for FY 2016 

(discussed in section V.A. of the Addendum 

to this proposed rule) and an estimated 

decrease in HCO payments for these cases. 

Based on the 418 LTCHs that were 

represented in the FY 2014 LTCH cases that 

were used for the analyses in this proposed 

rule, we estimate that aggregate FY 2016 

LTCH PPS payments would be 

approximately $5.169 billion, as compared to 

estimated aggregate FY 2015 LTCH PPS 

payments of approximately $5.420 billion, 

resulting in an estimated overall decrease in 

LTCH PPS payments of approximately $251 

million. Because the combined distributional 

effects and estimated payment changes 

exceed $100 million, this proposed rule is a 

major economic rule. We note that this 

estimated $251 million decrease in LTCH 

PPS payments in FY 2016 (which includes 

estimated payments for LTCH PPS standard 

Federal payment rate cases and site neutral 

payment rate cases) does not reflect changes 

in LTCH admissions or case-mix intensity, 

which would also affect the overall payment 

effects of what is proposed in this rule. 

The LTCH PPS standard Federal payment 

rate for FY 2015 is $41,043.71. For FY 2016, 

we are proposing to establish a LTCH PPS 

standard Federal payment rate of $41,883.93, 

which reflects the proposed 1.9 percent 

annual update to the LTCH PPS standard 

Federal payment rate and the proposed area 

wage budget neutrality factor of 1.001444 to 

ensure that the proposed changes in the wage 

indexes and labor-related share do not 

influence aggregate payments. For LTCHs 

that fail to submit data for the LTCH QRP, 

in accordance with section 1886(m)(5)(C) of 

the Act, we are proposing to establish a 

LTCH PPS standard Federal payment rate of 

$41,061.87. This proposed reduced LTCH 

PPS standard Federal payment rate reflects 

the proposed updates described above as 

well as the required 2.0 percentage point 

reduction to the annual update for failure to 

submit data to the LTCH QRP. We note that 

the proposed factors described above to 

determine the FY 2016 LTCH PPS standard 

Federal payment rate are applied to the FY 

2015 LTCH PPS standard Federal rate set 

forth under § 412.523(c)(3)(xi) (that is, 

$41,034.71). 

Table IV (column 6) shows that the 

estimated change attributable solely to the 

proposed annual update to the LTCH PPS 

standard Federal payment rate is projected to 

result in an increase of 1.6 percent in 

payments per discharge for LTCH PPS 

standard Federal payment rate cases from FY 

2015 to FY 2016, on average, for all LTCHs. 

In addition to the annual update to the LTCH 

PPS standard Federal payment rate for FY 

2016, this estimated increase in aggregate 

proposed LTCH PPS payments to LTCH PPS 

standard Federal payment rate cases of 1.6 

percent shown in column 6 of Table IV also 

includes estimated payments for SSO cases 

that are paid using special methodologies 

that are not affected by the annual update to 

the LTCH PPS standard Federal payment 

rate, as well as the penalty that is applied to 

the annual update of LTCHs that do not 

submit the required LTCH QRP data. 

Therefore, for all hospital categories, the 

projected increase in payments based on the 

LTCH PPS standard Federal payment rate to 

LTCH PPS standard Federal payment rate 

cases is somewhat less than the proposed 1.9 

percent annual update for FY 2016. 

As discussed in section V.B. of the 

Addendum to this proposed rule, we are 

proposing to update the wage index values 

for FY 2016 based on the most recent 

available data, and we are proposing to 

continue to use labor market areas based on 

the OMB CBSA delineations. In addition, we 

are proposing to slightly lower the laborrelated share from 62.306 percent to 62.2 

percent under the LTCH PPS for FY 2016, 

based on the most recent available data on 

the relative importance of the proposed 

labor-related share of operating and capital 

costs based on the FY 2009-based LTCHspecific market basket. We also are proposing 

to apply an area wage level budget neutrality 

factor of 1.001444 to ensure that the 

proposed changes to the wage data and laborrelated share do not result in a change in 

estimated aggregate LTCH PPS payments to 

LTCH PPS standard Federal payment rate 

cases, which increases the proposed LTCH 

PPS standard Federal payment rate by 

approximately 0.14 percent. 

We currently estimate total HCO payments 

for LTCH PPS standard Federal payment rate 

cases are projected to decrease from FY 2015 

to FY 2016. Using the FY 2014 LTCH cases 

that were used for the analyses in this 

proposed rule, we estimate that the FY 2015 

HCO threshold of $14,972 (as established in 

the FY 2015 IPPS/LTCH PPS final rule) 

would result in estimated HCO payments for 

LTCH PPS standard Federal payment rate 

cases in FY 2015 that are above the estimated 

8 percent target. Specifically, we currently 

estimate that HCO payments for LTCH PPS 

standard Federal payment rate cases will be 

approximately 8.6 percent of the estimated 

total LTCH PPS standard Federal payment 

rate payments in FY 2015. Combined with 

our estimate that FY 2016 HCO payments for 

LTCH PPS standard Federal payment rate 

cases would be 8.0 percent of estimated total 

LTCH PPS standard Federal rate payments in 

FY 2016, this results in the estimated 

decrease of approximately 0.6 percent 

between FY 2015 and FY 2016. 

In calculating these estimated HCO 

payments we increased estimated costs by 

our actuaries’ projected market basket 

percentage increase factor. This increase in 

estimated costs also results in a projected 

increase in SSO payments in FY 2016. We 

estimate that these increased SSO payments 

in FY 2016 would increase total payments for 

LTCH PPS standard Federal rate payment 

cases by 0.2 percent. (Payments for SSO cases 

represent approximately 12.5 percent of the 

estimated total LTCH PPS payments for 

standard Federal payment rate cases.) 

Table IV below shows the estimated impact 

of the proposed payment rate and policy 

changes on LTCH PPS payments for LTCH 

PPS standard Federal payment rate cases for 

FY 2016 by comparing estimated FY 2015 

LTCH PPS payments to estimated FY 2016 

LTCH PPS payments. (As noted earlier, our 

analysis does not reflect changes in LTCH 

admissions or case-mix intensity.) The 

projected increase in payments from FY 2015 

to FY 2016 for LTCH PPS standard Federal 

payment rate cases of 1.2 percent is 

attributable to the impacts of the proposed 

change to the LTCH PPS standard Federal 

payment rate (1.6 percent in Column 6) and 

the effect of the estimated decrease in HCO 

payments for LTCH PPS standard Federal 

payment cases (¥0.6 percent), and the 

estimated increase in proposed payments for 

SSO cases (0.2 percent). 

As we discuss in detail throughout this 

proposed rule, based on the most recent 

available data, we believe that the provisions 

of this proposed rule relating to the LTCH 

PPS, which are projected to result in an 

overall decrease in estimated aggregate LTCH 

PPS payments, and the resulting LTCH PPS 

payment amounts would result in 

appropriate Medicare payments that are 

consistent with the statute. 


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2. Impact on Rural Hospitals 

For purposes of section 1102(b) of the Act, 

we define a small rural hospital as a hospital 

that is located outside of an urban area and 

has fewer than 100 beds. As shown in Table 

IV, we are projecting a 1.2 percent increase 

in estimated payments for LTCH PPS 

standard Federal payment rate cases. This 

estimated impact is based on the FY 2014 

data for the 21 rural LTCHs (out of 418 

LTCHs) that were used for the analyses in 

this proposed rule. We note that these 

impacts do not include LTCH PPS site 

neutral payment rate cases for the reasons 

discussed in section J.3 of this Appendix. 

3. Anticipated Effects of Proposed LTCH PPS 

Payment Rate Changes and Policy Changes 

a. Budgetary Impact 

Section 123(a)(1) of the BBRA requires that 

the PPS developed for LTCHs ‘‘maintain 

budget neutrality.’’ We believe that the 

statute’s mandate for budget neutrality 

applies only to the first year of the 

implementation of the LTCH PPS (that is, FY 

2003). Therefore, in calculating the FY 2003 

standard Federal rate under § 412.523(d)(2), 

we set total estimated payments for FY 2003 

under the LTCH PPS so that estimated 

aggregate payments under the LTCH PPS 

were estimated to equal the amount that 

would have been paid if the LTCH PPS had 

not been implemented. 

Section 1886(m)(6)(A) of the Act 

establishes a new dual-rate LTCH PPS 

payment structure with two distinct payment 

rates for LTCH discharges beginning in FY 

2016. As discussed in section VII.B. of the 

preamble of this proposed rule, under this 

statutory change, LTCH discharges that meet 

the patient-level criteria for exclusion from 

the site neutral payment rate (that is, LTCH 

PPS standard Federal payment rate cases) 

would be paid based on the LTCH PPS 

standard Federal payment rate. LTCH 

discharges that would be paid at the site 

neutral payment rate would generally be paid 

the lower of the IPPS comparable per diem 

amount, including any applicable HCO 

payments or 100 percent of the estimated 

cost of the case. The statute also establishes 

a transitional payment method for cases that 

will be paid at the site neutral payment rate 

for LTCH discharges occurring in cost 

reporting periods beginning during FY 2016 

or FY 2017, under which the site neutral 

payment rate cases would be paid a blended 

payment rate calculated as 50 percent of the 

applicable site neutral payment rate amount 

for the discharge and 50 percent of the 

applicable LTCH PPS standard Federal 

payment rate for the discharge. (For 

additional details on the proposed 

application of the site neutral payment rate 

beginning in FY 2016, we refer readers to 

section VII.B. of the preamble of this 

proposed rule.) 

As discussed above in section I.J.1. of this 

Appendix, we project a decrease in aggregate 

LTCH PPS payments in FY 2016 of 

approximately $251 million. This estimated 

decrease in payments reflects the projected 

increase in payments to LTCH PPS standard 

Federal payment rate cases of approximately 

$42 million and the projected decrease in 

payments to site neutral payment rate cases 

of approximately $293 million under the new 

dual-rate LTCH PPS payment rate structure 

required by the statute beginning in FY 2016. 

As discussed in section VII.B.7.b. of the 

preamble of this proposed rule, our actuaries 

project cost and resource changes for site 

neutral payment rate cases due to the site 

neutral payment rates required under the 

statute. Specifically, our actuaries project 

that the costs and resource use for cases paid 

at the site neutral payment rate would likely 

be lower, on average, than the costs and 

resource use for cases paid at the LTCH PPS 

standard Federal payment rate, and would 

likely mirror the costs and resource use for 

IPPS cases assigned to the same MS–DRG. 

While we are able to incorporate this 

projection at an aggregate level into our 

payment modeling, because the historical 

claims data that we are using in this 

proposed rule to project estimated FY 2016 

LTCH PPS payments (that is, FY 2014 LTCH 

claims data) do not reflect this actuarial 

projection, we are unable to model the 

impact of the change in LTCH PPS payments 

for site neutral payment rate cases at the 

same level of detail with which we are able 

to model the impacts of the changes to LTCH 

PPS payments for LTCH PPS standard 

Federal payment rate cases. Therefore, Table 

IV below only reflects changes in LTCH PPS 

payments for LTCH PPS standard Federal 

payment rate cases and, unless otherwise 

noted, the remaining discussion in section J.3 

refers only to the impact on LTCH PPS 

payments for LTCH PPS standard Federal 

payment rate cases. Below we present our 

provider impact analysis for the proposed 

changes that affect LTCH PPS payments for 

LTCH PPS standard Federal payment rate 

cases. 

b. Impact on Providers 

Under the new dual-rate LTCH PPS 

payment structure, the statute establishes two 

distinct payment rates for LTCH discharges 

occurring in cost reporting periods beginning 

on or after October 1, 2015. Under that 

statute, any discharges that occur on or after 

October 1, 2015, but prior to the start of the 

LTCH’s FY 2016 cost reporting period will be 

paid at the LTCH PPS standard Federal 

payment rate. On or after the start of an 

LTCH’s FY 2016 cost reporting period, 

discharges are paid based on the nature of the 

case. As described previously, LTCH PPS 

standard Federal payment rate cases are 

defined as LTCH discharges that would meet 

the proposed patient-level criteria to be 

excluded from the typically lower site 

neutral payment rate, and site neutral 

payment rate cases are defined as LTCH 

discharges that would not meet the proposed 

patient-level criteria and would generally be 

paid the generally lower site neutral payment 

rate. For discharges occurring in cost 

reporting periods beginning in FY 2016 or 

2017, however, the statute specifies that site 

neutral payment rate cases will be paid based 

on a transitional payment method that would 

be calculated as 50 percent of the applicable 

site neutral payment rate amount and 50 

percent of the applicable LTCH PPS standard 

Federal payment rate. 

The basic methodology for determining a 

per discharge payment for LTCH PPS 

standard Federal payment rate cases is set 

forth under § 412.515 through § 412.536. In 

addition to adjusting the LTCH PPS standard 

Federal payment rate by the MS–LTC–DRG 

relative weight, we make adjustments to 

account for area wage levels and SSOs. 

LTCHs located in Alaska and Hawaii also 

have their payments adjusted by a COLA. As 

explained previously, under our proposed 

application of the new dual-rate LTCH PPS 

payment structure required under section 

1886(m)(6) of the Act, the LTCH PPS 

standard Federal payment rate would 

generally only be used to determine 

payments for LTCH PPS standard Federal 

payment rate cases (that is, those LTCH PPS 

cases that meet the statutory criteria to be 

excluded from the site neutral payment rate). 

Under the new statutory changes to the LTCH 

PPS, LTCH discharges that would not meet 

the statutory patient-level criteria for 

exclusion would be paid the site neutral 

payment rate, which we are proposing to 

calculate as the lower of the IPPS comparable 

per diem amount as determined under 

§ 412.529(d)(4), including any applicable 

outlier payments, or 100 percent of the 

estimated cost of the case as determined 

under existing § 412.529(d)(2). In addition, 

when certain thresholds are met, LTCHs also 

would be able to receive HCO payments for 

both LTCH PPS standard Federal payment 

rate cases and site neutral payment rate cases 

that are paid at the IPPS comparable per 

diem amount. 

To understand the impact of the changes 

to the LTCH PPS payments for LTCH PPS 

standard Federal payment rate cases 

presented in this proposed rule on different 

categories of LTCHs for FY 2016, it is 

necessary to estimate payments per discharge 

for FY 2015 using the rates, factors, and the 

policies established in the FY 2015 IPPS/

LTCH PPS final rule and estimate payments 

per discharge for FY 2016 using the rates, 

factors, and the policies proposed in this FY 

2016 IPPS/LTCH PPS proposed rule (as 

discussed in section VII. of the preamble of 

this proposed rule and section V. of the 

Addendum to this proposed rule). As 

discussed elsewhere in this rule, these 

estimates are based on the best available 

LTCH claims data and other factors, such as 

the application of inflation factors to estimate 

costs for SSO and HCO cases in each year. 

The resulting analyses can then be used to 

compare how our proposals applicable to 

LTCH PPS standard Federal payment rate 

cases affect different groups of LTCHs. 

For the following analysis, we group 

hospitals based on characteristics provided 

in the OSCAR data, FY 2012 through FY 

2013 cost report data in HCRIS, and PSF 

data. Hospital groups included the following: 

• Location: large urban/other urban/rural. 

• Participation date. 

• Ownership control. 

• Census region. 

• Bed size. 

c. Calculation of LTCH PPS Payments for 

LTCH PPS Standard Federal Payment Rate 

Cases 

For purposes of this impact analysis, to 

estimate the per discharge payment effects of 

our proposed policies on payments for LTCH 

PPS standard Federal payment rate cases, we 

simulated FYs 2015 and 2016 payments on 


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a case-by-case basis using historical LTCH 

claims from the FY 2014 MedPAR files that 

would have met the criteria to be paid at the 

LTCH PPS standard Federal payment rate if 

the statutory patient-level criteria had been 

in effect at the time of discharge for those 

cases. For modeling FY 2015 LTCH PPS 

payments, we used the FY 2015 standard 

Federal rate of $41,043.71, or $40,240.51 for 

LTCHs that failed to submit quality data as 

required under the requirements of the LTCH 

QRP, which reflects the 2.0 percentage points 

reduction required by section 1886(m)(5)(C) 

of the Act. Similarly, for modeling FY 2016 

LTCH PPS standard Federal rate payments, 

we used the proposed FY 2016 standard 

Federal payment rate of $41,883.93, or 

$41,061.87 for LTCHs that failed to submit 

quality data as required under the 

requirements of the LTCH QRP, again, to 

reflect the 2.0 percentage points reduction 

required by section 1886(m)(5)(C) of the Act. 

In each case, we applied the applicable 

adjustments for area wage levels and the 

COLA for LTCHs located in Alaska and 

Hawaii. Specifically, for modeling FY 2015 

LTCH PPS payments, we used the current FY 

2015 labor-related share (62.306 percent); the 

wage index values established in the Tables 

12A through 12D listed in the Addendum to 

the FY 2015 IPPS/LTCH PPS final rule 

(which are available via the Internet on the 

CMS Web site), including the transitional 

blended wage index for the implementation 

of the CBSA delineations in FY 2015; the FY 

2015 fixed-loss amount for LTCH PPS 

standard Federal payment rate cases of 

$14,972 (as discussed in section V.D. of the 

Addendum to that final rule) and the FY 

2015 COLA factors (shown in the table in 

section V.C. of the Addendum to that final 

rule) to adjust the FY 2015 nonlabor-related 

share (37.694 percent) for LTCHs located in 

Alaska and Hawaii. Similarly, for modeling 

FY 2016 LTCH PPS payments, we used the 

proposed FY 2016 LTCH PPS labor-related 

share (62.2 percent), the proposed FY 2016 

wage index values from Tables 12A and 12B 

listed in section VI. of the Addendum to this 

proposed rule (which are also available via 

the Internet on the CMS Web site), the 

proposed FY 2016 fixed-loss amount for 

LTCH PPS standard Federal payment rate 

cases of $18,768 (as discussed in section 

V.D.3. of the Addendum to this proposed 

rule), and the proposed FY 2016 COLA 

factors (shown in the table in section V.C. of 

the Addendum to this proposed rule) to 

adjust the proposed FY 2016 nonlaborrelated share (37.8 percent) for LTCHs 

located in Alaska and Hawaii. 

As discussed above, our impact analysis 

reflects an estimated change in payments for 

SSO cases, as well as an estimated decrease 

in HCO payments for LTCH PPS standard 

Federal payment rate cases (as described 

previously in section J.1. of this Appendix). 

In modeling proposed payments for SSO and 

HCO cases for LTCH PPS standard Federal 

payment rate cases, we applied an inflation 

factor of 5.0 percent (determined by the 

Office of the Actuary) to update the 2014 

costs of each case. 

The impacts presented below reflect the 

estimated ‘‘losses’’ or ‘‘gains’’ among the 

various classifications of LTCHs from FY 

2015 to FY 2016 based on the proposed 

payment rates and policy changes applicable 

to LTCH PPS standard Federal payment rate 

cases presented in this proposed rule. Table 

IV illustrates the estimated aggregate impact 

of the change in LTCH PPS payments for 

LTCH PPS standard Federal payment rate 

cases among various classifications of 

LTCHs. (As discussed previously, these 

impacts do not include LTCH PPS site 

neutral payment rate cases.) 

• The first column, LTCH Classification, 

identifies the type of LTCH. 

• The second column lists the number of 

LTCHs of each classification type. 

• The third column identifies the number 

of LTCH cases expected to meet the LTCH 

PPS standard Federal payment rate criteria. 

• The fourth column shows the estimated 

FY 2015 payment per discharge for LTCH 

cases expected to meet the LTCH PPS 

standard Federal payment rate criteria (as 

described above). 

• The fifth column shows the estimated FY 

2016 payment per discharge for LTCH cases 

expected to meet the LTCH PPS standard 

Federal payment rate criteria (as described 

above). 

• The sixth column shows the percentage 

change in estimated payments per discharge 

for LTCH cases expected to meet the LTCH 

PPS standard Federal payment rate criteria 

from FY 2015 to FY 2016 due to the proposed 

annual update to the standard Federal rate 

(as discussed in section V.A.2. of the 

Addendum to this proposed rule). 

• The seventh column shows the 

percentage change in estimated payments per 

discharge for LTCH cases expected to meet 

the LTCH PPS standard Federal payment rate 

criteria from FY 2015 to FY 2016 for 

proposed changes to the area wage level 

adjustment (that is, the proposed wage 

indexes and the proposed labor-related 

share), including the application of a 

proposed area wage level budget neutrality 

factor (as discussed in section V.B. of the 

Addendum to this proposed rule). 

• The eighth column shows the percentage 

change in estimated payments per discharge 

for LTCH cases expected to meet the LTCH 

PPS standard Federal payment rate criteria 

from FY 2015 (Column 4) to FY 2016 

(Column 5) for all proposed changes (and 

includes the effect of estimated changes to 

HCO and SSO payments). 


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TABLE IV—IMPACT OF

PROPOSED

PAYMENT

RATE AND

POLICY

CHANGES TO LTCH PPS PAYMENTS FOR

STANDARD

PAYMENT

RATE

CASES FOR FY 2016 

[Estimated FY 2015 Payments Compared to Estimated FY 2016 Payments] 

LTCH classification Number of LTCHs 

Number of LTCH 

PPS standard 

federal payment 

rate cases 

Average FY 2015 

LTCH PPS 

payment per case 

Proposed average 

FY 2016 LTCH 

PPS standard 

federal payment 

rate payment per 

case 1

Proposed percent 

change in 

payments per 

case due to the 

annual update to 

the LTCH PPS 

standard federal 

rate 2

Proposed percent 

change in payments per case 

due to proposed 

changes to the 

area wage level 

adjustment with 

budget neutrality 3

Proposed percent 

change in 

payments per 

case from FY 

2015 to FY 2016 

for all proposed 

changes 4

(1) (2) (3) (4) (5) (6) (7) (8) 

ALL PROVIDERS ...................................... 416 73,427 $46,024 $46,564 1.6 0.0 1.2 BY LOCATION: 

RURAL ............................................... 21 2,156 $39,110 $39,284 1.5 

¥0.8 0.4 

URBAN ............................................... 395 71,271 $46,233 $46,784 1.6 0.0 1.2 

LARGE ........................................ 197 42,434 $48,434 $49,023 1.6 0.1 1.2 OTHER ........................................ 198 28,837 $42,993 $43,489 1.6 

¥0.2 1.2 

BY PARTICIPATION DATE: 

BEFORE OCT. 1983 .......................... 13 2,057 $42,043 $43,120 1.6 0.7 2.6 OCT. 1983—SEPT. 1993 .................. 43 9,076 $51,663 $52,209 1.6 0.1 1.1 OCT. 1993—SEPT. 2002 .................. 179 32,454 $44,666 $45,290 1.7 0.0 1.4 OCTOBER 2002 and AFTER ............ 181 29,840 $46,059 $46,469 1.6 

¥0.1 0.9 

BY OWNERSHIP TYPE: .............................. .............................. .............................. .............................. .............................. .............................. ..............................

VOLUNTARY ..................................... 77 9,907 $46,853 $47,348 1.6 0.0 1.1 PROPRIETARY .................................. 326 62,153 $45,776 $46,324 1.6 0.0 1.2 GOVERNMENT .................................. 13 1,367 $51,255 $51,789 1.6 

¥0.1 1.0 

BY REGION: .............................. .............................. .............................. .............................. .............................. .............................. ..............................

NEW ENGLAND ................................ 13 2,907 $41,660 $42,687 1.5 0.7 2.5 MIDDLE ATLANTIC ........................... 28 5,296 $51,636 $51,981 1.7 

¥0.1 0.7 

SOUTH ATLANTIC ............................ 61 12,072 $46,280 $46,832 1.6 0.1 1.2 EAST NORTH CENTRAL .................. 69 12,164 $46,524 $47,034 1.7 0.0 1.1 EAST SOUTH CENTRAL .................. 33 5,146 $44,648 $44,996 1.6 0.0 0.8 WEST NORTH CENTRAL ................. 25 3,777 $46,228 $46,678 1.6 

¥0.2 1.0 

WEST SOUTH CENTRAL ................. 129 19,498 $40,447 $41,060 1.6 

¥0.1 1.5 

MOUNTAIN ........................................ 33 4,245 $46,867 $47,528 1.6 0.2 1.4 PACIFIC ............................................. 25 8,322 $56,266 $56,714 1.6 

¥0.2 0.8 

BY BED SIZE: 

BEDS: 0–24 ....................................... 27 1,517 $42,268 $42,916 1.6 0.5 1.5 BEDS: 25–49 ..................................... 191 24,668 $44,141 $44,640 1.6 

¥0.1 1.1 

BEDS: 50–74 ..................................... 119 20,342 $46,764 $47,129 1.6 

¥0.3 0.8 

BEDS: 75–124 ................................... 46 12,998 $49,200 $49,817 1.6 0.2 1.3 BEDS: 125–199 ................................. 21 7,703 $45,705 $46,370 1.6 0.1 1.5 BEDS: 200 + ...................................... 12 6,199 $45,741 $46,676 1.7 0.3 2.0 

1Estimated FY 2016 LTCH PPS payments to LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria based on the proposed payment rate and factor changes applicable to LTCH PPS standard Federal payment rate cases presented in the preamble of and the Addendum to this proposed rule. 2Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for the 

proposed annual update to the LTCH PPS standard Federal rate. 3Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for proposed changes to the area wage level adjustment under § 412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule). 4Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 (shown in Column 4) to FY 2016 (shown in Column 5), including all of the proposed changes to the rates and factors applicable to LTCH PPS standard Federal payment rate cases presented in the preamble and the Addendum to this proposed rule. Note, this column, which shows the percent change in estimated payments per discharge for all proposed changes, does not equal the sum of the percent changes in estimated payments per discharge for the proposed annual update to the LTCH PPS standard Federal payment rate (column 6) and the proposed changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated. 


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d. Results 

Based on the FY 2014 LTCH cases (from 

418 LTCHs) that were used for the analyses 

in this proposed rule, we have prepared the 

following summary of the impact (as shown 

above in Table IV) of the proposed LTCH PPS 

payment rate and proposed policy changes 

for LTCH PPS standard Federal payment rate 

cases presented in this proposed rule. The 

impact analysis in Table IV shows that 

estimated payments per discharge for LTCH 

PPS standard Federal payment rate cases are 

expected to increase 1.2 percent, on average, 

for all LTCHs from FY 2015 to FY 2016 as 

a result of the proposed payment rate and 

policy changes applicable to LTCH PPS 

standard Federal payment rate cases 

presented in this proposed rule. This 

estimated 1.2 percent increase in LTCH PPS 

payments per discharge to LTCH PPS 

standard Federal payment rate cases from FY 

2015 to FY 2016 for all LTCHs (as shown in 

Table IV) was determined by comparing 

estimated FY 2016 LTCH PPS payments 

(using the proposed payment rates and 

factors discussed in this proposed rule) to 

estimated FY 2015 LTCH PPS payments for 

LTCH discharges which would be LTCH PPS 

standard Federal payment rate cases if the 

new statutory dual-rate LTCH PPS payment 

structure had been in effect at the time of the 

discharge (as described in section I.J.3. of this 

Appendix). 

As stated previously, we are proposing to 

update the LTCH PPS standard Federal 

payment rate for FY 2016 by 1.9 percent 

based on the latest estimate of the LTCH PPS 

market basket increase (2.7 percent), the 

proposed reduction of 0.6 percentage point 

for the MFP adjustment, and the 0.2 

percentage point reduction consistent with 

sections 1886(m)(3) and (m)(4) of the Act. For 

LTCHs that fail to submit quality data under 

the requirements of the LTCH QRP, as 

required by section 1886(m)(5)(C) of the Act, 

a 2.0 percentage point reduction would be 

applied to the proposed annual update to the 

standard Federal rate. As explained earlier in 

this section, for most categories of LTCHs (as 

shown in Table IV, Column 6), the proposed 

payment increase due to the proposed 1.9 

percent annual update to the LTCH PPS 

standard Federal payment rate is projected to 

result in approximately a 1.6 percent increase 

in estimated payments per discharge for 

LTCH PPS standard Federal payment rate 

cases for all LTCHs from FY 2015 to FY 2016. 

This is because our estimate of the proposed 

changes in payments due to the proposed 

update to the LTCH PPS standard Federal 

payment rate also reflects estimated 

payments for SSO cases that will be paid 

using special methodologies that are not 

affected by the update to the LTCH PPS 

standard Federal payment rate. 

Consequently, we estimate that proposed 

payments to LTCH PPS standard Federal 

payment rate cases may increase by less than 

1.9 percent for certain hospital categories due 

to the proposed annual update to the LTCH 

PPS standard Federal payment rate for FY 

2016. 

(1) Location 

Based on the most recent available data, 

the vast majority of LTCHs are located in 

urban areas. Only approximately 5 percent of 

the LTCHs are identified as being located in 

a rural area, and approximately 3 percent of 

all LTCH PPS standard Federal payment rate 

cases are expected to be treated in these rural 

hospitals. The impact analysis presented in 

Table IV shows that the overall average 

percent increase in estimated payments per 

discharge for LTCH PPS standard Federal 

payment rate cases from FY 2015 to FY 2016 

for all hospitals is 1.2 percent. For rural 

LTCHs, the overall percent change for LTCH 

PPS standard Federal payment rate cases is 

estimated to be a 0.4 percent increase, while 

for urban LTCHs, we estimate the increase 

would be 1.2 percent. Both large urban and 

other urban LTCHs are projected to 

experience an increase of 1.2 percent in 

estimated payments per discharge for LTCH 

PPS standard Federal payment rate cases 

from FY 2015 to FY 2016, as shown in Table 

IV. 

(2) Participation Date 

LTCHs are grouped by participation date 

into four categories: (1) before October 1983; 

(2) between October 1983 and September 

1993; (3) between October 1993 and 

September 2002; and (4) October 2002 and 

after. Based on the most recent available data, 

the categories of LTCHs with the largest 

expected percentage of LTCH PPS standard 

Federal payment rate cases (approximately 

44 percent) are in LTCHs that began 

participating in the Medicare program 

between October 1993 and September 2002, 

and they are projected to experience a 1.4 

percent increase in estimated payments per 

discharge for LTCH PPS standard Federal 

payment rate cases from FY 2015 to FY 2016, 

as shown in Table IV. 

Approximately 3 percent of LTCHs began 

participating in the Medicare program before 

October 1983, and these LTCHs are projected 

to experience a higher than average percent 

increase (2.6 percent) in estimated payments 

per discharge for LTCH PPS standard Federal 

payment rate cases from FY 2015 to FY 2016, 

as shown in Table IV, which is primarily due 

to a projected larger than average increase in 

payments due to the proposed changes to the 

area wage adjustment. Approximately 10 

percent of LTCHs began participating in the 

Medicare program between October 1983 and 

September 1993. These LTCHs are projected 

to experience a 1.1 percent increase in 

estimated payments for LTCH PPS standard 

Federal payment rate cases from FY 2015 to 

FY 2016. LTCHs that began participating in 

the Medicare program after October 1, 2002, 

which treat approximately 40 percent of all 

LTCH PPS standard Federal payment rate 

cases, are projected to experience a 0.9 

percent increase in estimated payments from 

FY 2015 to FY 2016. 

(3) Ownership Control 

LTCHs are grouped into three categories 

based on ownership control type: Voluntary, 

proprietary, and government. Based on the 

most recent available data, approximately 19 

percent of LTCHs are identified as voluntary 

(Table IV). The majority (nearly 78 percent) 

of LTCHs are identified as proprietary while 

government-owned and operated LTCHs 

represent approximately 3 percent of LTCHs. 

Based on ownership type, voluntary LTCHs 

are expected to experience an average 

increase in payments to LTCH PPS standard 

Federal payment rate cases of 1.1 percent; 

proprietary LTCHs are expected to 

experience an increase of 1.2 percent in 

payments to LTCH PPS standard Federal 

payment rate cases, while government-owned 

and operating LTCHs are expected to 

experience an increase in payments to LTCH 

PPS standard Federal payment rate cases of 

1.0 percent from FY 2015 to FY 2016. 

(4) Census Region 

Estimated payments per discharge for 

LTCH PPS standard Federal payment rate 

cases for FY 2016 are projected to increase 

for LTCHs located in all regions in 

comparison to FY 2015. Of the 9 census 

regions, we project that the increase in 

estimated payments per discharge to LTCH 

PPS standard Federal payment rate cases 

would have the largest positive impact on 

LTCHs in the New England region (2.5 

percent as shown in Table IV), which is 

largely attributable to the proposed changes 

in the area wage level adjustment. 

In contrast, LTCHs located in the Middle 

Atlantic, East South Central, and Pacific 

regions are projected to experience the 

smallest increase in estimated payments per 

discharge for LTCH PPS standard Federal 

payment rate cases from FY 2015 to FY 2016. 

The lower than national average estimated 

increase in payments of 0.7 percent for the 

Middle Atlantic regions and 0.8 percent for 

the East South Central and Pacific regions is 

primarily due to estimated decreases in 

payments associated with the proposed 

changes to the area wage level adjustment. 

(5) Bed Size 

LTCHs are grouped into six categories 

based on bed size: 0–24 beds; 25–49 beds; 

50–74 beds; 75–124 beds; 125–199 beds; and 

greater than 200 beds. All bed size categories 

are projected to receive an increase in 

estimated payments per discharge for LTCH 

PPS standard Federal payment rate cases 

from FY 2015 to FY 2016. We project that 

large LTCHs (200+ beds) would experience a 

2.0 percent increase in payments for LTCH 

PPS standard Federal payment rate cases, 

which is higher than the national average 

mostly due to a larger than average increase 

from the proposed area wage level 

adjustment. Similarly, we project that both 

small LTCHs (0–24 beds) and relatively large 

LTCHs (125–199 beds) would experience a 

1.5 percent increase in payments for LTCH 

PPS standard Federal payment rate cases, 

which is also higher than the national 

average mostly due to increases in the 

proposed area wage level adjustment. LTCHs 

with 25 to 49 beds and 75 to 124 beds are 

expected to experience a nearly average 

increase in payments per discharge for LTCH 

PPS standard Federal payment rate cases 

from FY 2015 to FY 2016 (1.1 percent and 

1.3 percent, respectively), while LTCHs with 

between 50 and 74 beds are expected to 

experience a smaller than average increase in 

payments per discharge for LTCH PPS 

standard Federal payment rate cases from FY 

2015 to FY 2016 (0.8 percent). 

4. Effect on the Medicare Program 

As stated previously, we project that the 

provisions of this proposed rule would result 


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in an increase in estimated aggregate LTCH 

PPS payments to LTCH PPS standard Federal 

payment rate cases in FY 2016 relative to FY 

2015 of approximately $42 million (or 

approximately 1.2 percent) for the 418 

LTCHs in our database. Although, as stated 

previously, the hospital-level impacts do not 

include LTCH PPS site neutral payment rate 

cases, we estimate that the provisions of this 

proposed rule would result in a decrease in 

estimated aggregate LTCH PPS payments to 

site neutral payment rate cases in FY 2016 

relative to FY 2015 of approximately $293 

million (or approximately 14.3 percent) for 

the 418 LTCHs in our database. Therefore, we 

project that the provisions of this proposed 

rule would result in a decrease in estimated 

aggregate LTCH PPS payments to all cases in 

FY 2016 relative to FY 2015 of approximately 

$251 million (or approximately 4.6 percent) 

for the 418 LTCHs in our database. 

5. Effect on Medicare Beneficiaries 

Under the LTCH PPS, hospitals receive 

payment based on the average resources 

consumed by patients for each diagnosis. We 

do not expect any changes in the quality of 

care or access to services for Medicare 

beneficiaries as a result of this proposed rule, 

but we continue to expect that paying 

prospectively for LTCH services will enhance 

the efficiency of the Medicare program. 

K. Effects of Proposed Requirements for the 

Hospital Inpatient Quality Reporting (IQR) 

Program 

In section VIII.A. of the preamble of this 

proposed rule, we discuss our proposed 

requirements for hospitals to report quality 

data under the Hospital IQR Program in order 

to receive the full annual percentage increase 

for the FY 2018 payment determination. 

In this proposed rule, we are proposing to 

remove nine measures from the Hospital IQR 

Program for the FY 2018 payment 

determination and subsequent years: 

• STK–01 Venous Thromboembolism 

(VTE) Prophylaxis (NQF #0434); 

• STK–06: Discharged on Statin 

Medication* (NQF #0439); 

• STK–08: Stroke Education* (NQF 

endorsement removed); 

• VTE–1: Venous Thromboembolism 

Prophylaxis* (NQF #0371); 

• VTE–2: Intensive Care Unit Venous 

Thromboembolism Prophylaxis* (NQF 

#0372); 

• VTE–3: Venous Thromboembolism 

Patients with Anticoagulation Overlap 

Therapy* (NQF #0373); 

• AMI–7a Fibrinolytic Therapy Received 

Within 30 Minutes of Hospital Arrival* (NQF 

#0164); 

• IMM–1 Pneumococcal Immunization 

(NQF #1653); and 

• SCIP-Inf-4 Cardiac Surgery Patients with 

Controlled Postoperative Blood Glucose 

(NQF #0300). 

(An asterisk (*) indicates that the measure 

is proposed for retention as an electronic 

clinical quality measure for the FY 2018 

payment determination in section VIII.A.8. of 

the preamble of this proposed rule.) 

The anticipated effect of removing these 

measures would be a reduction in the burden 

associated with the collection of chartabstracted data. Due to the burden associated 

with the collection of chart-abstracted data, 

we estimate that the proposed removal of 

AMI–7a would result in a burden reduction 

of approximately 219,000 hours across all 

hospitals. We estimate that the proposed 

removal of the 6 VTE and STK chartabstracted measures would result in a burden 

reduction of approximately 522,000 hours 

across all hospitals. The remaining two 

measures proposed for removal have been 

previously suspended from the Hospital IQR 

Program. Therefore, their proposed removal 

would not affect burden to hospitals. In total, 

we estimate that the removal of 6 measures 

would result in a total burden reduction of 

approximately 741,000 hours for the FY 2018 

payment determination across all hospitals. 

We are retaining six of the chart-abstracted 

measures proposed for removal as electronic 

clinical quality measures. We believe that 

retaining a variety of electronic clinical 

quality measures would result in increased 

hospital familiarity with electronic reporting. 

We further believe retaining some measures 

as electronic clinical quality measures would 

not affect the overall burden, as these 

measures were available for electronic 

reporting under previous requirements. 

In this proposed rule, we are proposing 

refinements to the measure cohorts for: (1) 

The Hospital 30-Day, All-Cause, RiskStandardized Mortality Rate (RSMR) 

Following Pneumonia Hospitalization 

measure (NQF #0468); and (2) the Hospital 

30-Day, All-Cause, Risk-Standardized 

Readmission Rate (RSRR) Following 

Pneumonia Hospitalization measure (NQF 

#0506). Expanding the measure cohort to 

include a broader population of patients adds 

a large number of patients, as well as 

additional hospitals, to the CMS 30-day 

Pneumonia RSMR and RSRR measures. 

However, this expansion would not affect the 

burden on hospitals or hospital performance 

on the Hospital IQR Program because these 

measures are claims-based and, therefore, 

require no additional effort on hospitals’ part 

to submit the required data. 

We also are proposing to add eight 

additional measures to the Hospital IQR 

Program measure set beginning with the FY 

2018 payment determination and for 

subsequent years. Seven of these measures 

are claims-based, and one measure is 

structural. The eight proposed new measures 

are: 

• Hospital Survey on Patient Safety 

Culture (structural); 

• Kidney/UTI Clinical Episode-Based 

Payment (claims-based); 

• Cellulitis Clinical Episode-Based 

Payment (claims-based); 

• Gastrointestinal Hemorrhage Clinical 

Episode-Based Payment (claims-based); 

• (Lumbar Spine Fusion/Re-Fusion 

Clinical Episode-Based Payment (claimsbased); 

• Hospital-Level, Risk-Standardized 

Payment Associated with an Episode-of-Care 

for Primary Elective THA/TKA (claimsbased); 

• Excess Days in Acute Care after 

Hospitalization for Acute Myocardial 

Infarction (claims-based); and 

• Excess Days in Acute Care after 

Hospitalization for Heart Failure (claimsbased). 

We believe adopting the seven claimsbased measures above would have no effect 

on hospital burden because they do not 

require additional effort on the part of 

hospitals. We further believe adopting the 

Hospital Survey on Patient Safety Culture 

measure would have a negligible effect on 

hospital burden, but may result in hospital 

staff spending time to respond to the Survey. 

For the FY 2018 payment determination 

and subsequent years, we also are proposing 

to require hospitals to submit 16 measures 

electronically using CEHRT 2014 for the 

Hospital IQR Program in a manner that 

would permit eligible hospitals to partially 

align Hospital IQR Program requirements 

with some requirements under the Medicare 

EHR Incentive Program. We believe this 

proposal would increase the burden 

associated with electronic clinical quality 

measure reporting because electronic 

reporting was previously voluntary. The total 

burden increase is estimated to be 5 hours 

and 20 minutes per hospital. 

We note that we are proposing to change 

the requirements for population and 

sampling such that hospitals would be 

required to submit population and sample 

size data only for those measures that a 

hospital submits as chart-abstracted measures 

under the Hospital IQR Program. We believe 

this proposal would result in a minimal 

decrease in burden as hospitals would not 

have to report population and sample size if 

they electronically report any of the measures 

that can be reported either as an electronic 

clinical quality measure or via chartabstraction. 

We also note that we are proposing to 

modify the existing processes for validation 

of chart-abstracted Hospital IQR Program 

data to remove one stratum. This proposal 

would not affect hospital burden. Detailed 

information on the estimated burden 

specifically associated with information 

collection for the Hospital IQR Program for 

the FY 2018 payment determination is 

included in section X.B.6 of the preamble of 

this proposed rule. 

In addition to the activities described 

above, participation in the Hospital IQR 

Program requires hospitals to participate in a 

number of other activities, including: (1) 

Reviewing reports for claims-based measure 

sets; (2) completing HAI validation templates 

for CLABSI and CAUTI; (3) completing HAI 

validation templates for MRSA bacteremia 

and CDI; and (4) completing other forms and 

structural measures. The cumulative effects 

of these activities on facility burden are 

expected to be substantially similar to that 

stated for FY 2017. 

In general, however, we anticipate that, 

because of the new requirements we are 

proposing for reporting for the FY 2018 

payment determination (if finalized), the 

number of hospitals not receiving the full 

annual percentage increase may be higher 

than average. Information is not available to 

determine the precise number of hospitals 

that would not meet the proposed 

requirements to receive the full annual 

percentage increase for the FY 2018 payment 

determination. Historically, 100 hospitals, on 

average, that participate in the Hospital IQR 

Program do not receive the full annual 


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percentage increase in any fiscal year. We 

anticipate that, because of the new 

requirements we are proposing for reporting 

for the FY 2018 payment determination (if 

finalized), the number of hospitals not 

receiving the full annual percentage increase 

may be higher than average. The highest 

number of hospitals failing to meet program 

requirements was approximately 200 after 

the introduction of new NHSN reporting 

requirements. If the number of hospitals 

failing does increase because of the new 

requirements, we anticipate that, over the 

long run, this number would decline as 

hospitals gain more experience with these 

requirements. 

Finally, under OMB Control Number 0938– 

1022, we estimated that the total burden for 

the FY 2017 payment determinations was 

1,781 hours per hospital and 5.9 million 

hours across approximately 3,300 hospitals 

participating in the Hospital IQR Program. 

We estimate here that the total burden for the 

FY 2018 payment determination would 

increase to 2,293 hours per hospital and 7.6 

million hours across approximately 3,300 

hospitals due to the proposals discussed 

above and updates to the historical data used 

to determine the number of cases reported 

and time for reporting per measure set. The 

table below describes the hospital burden 

associated with the Hospital IQR Program 

requirements. 

BURDEN IMPACT OF HOSPITAL IQR PROGRAM REQUIREMENTS FOR FY 2018 

Hospital IQR program requirement 

Number of 

hospitals 

impacted 

Burden per hospital 

for previously 

finalized 

requirements 

Burden per hospital 

for all requirements 

as proposed 

(continuing, 

removed, added) 

Net change 

in burden 

per hospital 

Chart-abstracted and structural measures, forms .... 3,300 ......................... 1,131 hours ............... 906 hours .................. ¥225 hours. 

Review reports for claims-based measures ............. 3,300 ......................... 4 hours ...................... 4 hours ...................... 0. 

Electronic Clinical Quality Measure Reporting ......... Unknown ................... 0 hours (electronic 

clinical quality 

measure reporting 

voluntary for FY 

2017).

5 hours 20 minutes ... +5 hours 20 

minutes. 

Validation templates .................................................. Up to 600 .................. 72 hours .................... 107 hours .................. +35 hours. 

Electronic Clinical Quality Measure validation test ... Up to 100 .................. 16 hours .................... 0 hours (no test this 

year).

¥16 hours. 

Validation charts photocopying ................................. Up to 600 .................. $8,496 ....................... $12,960 ..................... +$4,464. 

In implementing the Hospital IQR Program 

and other quality reporting programs, we 

have focused on measures that have high 

impact and support CMS and HHS priorities 

for improved quality and efficiency of care 

for Medicare beneficiaries. 

L. Effects of Proposed Requirements for the 

PPS-Exempt Cancer Hospital Quality 

Reporting (PCHQR) Program for FY 2018 

In section VIII.B. of the preamble of this 

proposed rule, we discuss our proposed 

policies for the quality data reporting 

program for PPS-exempt cancer hospitals 

(PCHs), which we refer to as the PPS-Exempt 

Cancer Hospital Quality Reporting (PCHQR) 

Program. The PCHQR Program is authorized 

under section 1866(k) of the Act, which was 

added by section 3005 of the Affordable Care 

Act. 

In section VIII.B.3. of the preamble of this 

proposed rule, we are proposing that PCHs 

will submit data on three additional 

measures beginning with the FY 2018 

program: (1) The CDC NHSN Facility-Wide 

Inpatient Hospital-Onset MethicillinResistant Staphylococcus aureus (MRSA) 

Bacteremia Outcome Measure (NQF #1716); 

(2) the CDC NHSN Facility-Wide Inpatient 

Hospital-Onset Clostridium difficile Infection 

(CDI) Outcome Measure (NQF #1717); and, 

(3) the CDC NHSN Influenza Vaccination 

Coverage Among Healthcare Personnel 

Measure (NQF #0431). In conjunction with 

our proposal in section VIII.B.2. of the 

preamble of this proposed rule to remove the 

six SCIP measures from the PCHQR Program 

beginning with fourth quarter (Q4) 2015 

discharges and for subsequent years, the 

PCHQR measure set would consist of 16 

measures for the FY 2018 program. 

The impact of the proposed new 

requirements for the PCHQR Program is 

expected to be minimal overall because all 11 

PCHs are already submitting quality measure 

data to the CDC NHSN and are familiar with 

this reporting process. Beginning with Q1 

2013 events, PCHs have been submitting 

Central Line-associated Bloodstream 

Infection (CLABSI) and Catheter-Associated 

Urinary Tract Infection (CAUTI) data to the 

CDC NHSN (77 FR 53566). Similarly, 

beginning with Q1 2014 events, PCHs have 

been submitting Surgical Site Infections (SSI) 

data to the CDC NHSN (78 FR 50849). As a 

result, PCHs are familiar with the CDC NHSN 

IT infrastructure and programmatic 

operations. In addition to fostering 

transparency and facilitating public 

reporting, we believe our requirements 

uphold our goals in improving quality of care 

and achieving better health outcomes, which 

outweighs burden. 

One expected effect of the PCHQR Program 

is to keep the public informed of the quality 

of care provided by PCHs. We will publicly 

display quality measure data collected under 

the PCHQR Program as required under the 

Act. These data will be displayed on the 

Hospital Compare Web site. The goals of 

making these data available to the public in 

a user-friendly and relevant format include, 

but are not limited to: (1) Allowing the public 

to compare PCHs in order to make informed 

health care decisions regarding care setting; 

and (2) providing information about current 

trends in health care. Furthermore, PCHs can 

use their own health care quality data for 

many purposes such as in risk management 

programs, healthcare associated infection 

prevention programs, and research and 

development activities, among others. 

M. Effects of Proposed Requirements for the 

Long-Term Care Hospital Quality Reporting 

Program (LTCH QRP) for FY 2018 

In section VIII.C.1. of the preamble of this 

proposed rule, we discuss the 

implementation of section 1886(m)(5) of the 

Act, which was added by section 3004(a) of 

the Affordable Care Act. Section 1886(m)(5) 

of the Act provides that, for rate year 2014 

and each subsequent year, any LTCH that 

does not submit data to the Secretary in 

accordance with section 1886(m)(5)(C) and 

(F) of the Act shall receive a 2 percentage 

point reduction to the annual update to the 

standard Federal rate for discharges for the 

hospital during the applicable fiscal year. 

In the FY 2015 IPPS/LTCH PPS final rule 

(76 FR 50443 through 50445), we estimated 

that only a few LTCHs would not receive the 

full annual percentage increase in any fiscal 

year as a result of failure to submit data 

under the LTCH QRP. There are 

approximately 442 LTCHs currently 

reporting quality data to CMS. At the time 

that this analysis was prepared, 47, or 

approximately 10 percent, of these LTCHs 

did not receive the full annual percentage 

increase for the FY 2015 annual payment 

update determination. Information is not 

available to determine the precise number of 

LTCHs that will not meet the requirements to 

receive the full annual percentage increase 

for the FY 2016 payment determination. 

We believe that a majority of LTCHs will 

continue to collect and submit data for the 

FY 2017 payment determination and 

subsequent years because they will continue 

to view the LTCH QRP as an important step 

in improving the quality of care patients 

receive in the LTCHs. We believe that the 

burden associated with the LTCH QRP is the 

time and effort associated with data 

collection. 


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In this FY 2016 IPPS/LTCH PPS proposed 

rule, we are retaining 12 previously finalized 

measures, two of which we are proposing in 

order to establish their use as cross-setting 

measures that satisfy the required addition of 

quality measures under the domains of skin 

integrity and incidence of major falls, as 

mandated by the section 1899B of the Act: 

Percent of Residents or Patients with 

Pressure Ulcers That Are New or Worsened 

(Short Stay) (NQF #0678), and an 

Application of Percent of Residents 

Experiencing One or More Falls with Major 

Injury (Long Stay) (NQF #0674). We are 

proposing a third previously finalized 

measure, All-Cause Unplanned Readmission 

Measure for 30 Days Post-Discharge From 

LTCHs (NQF #2512), in order to establish the 

newly NQF-endorsed status of this measure. 

Finally, we are proposing the application of 

Percent of LTCH Patients With an Admission 

and Discharge Functional Assessment and a 

Care Plan That Addresses Function (NQF 

#2631; under review), which satisfies the 

addition of a quality measure under the third 

initially required domain of functional status, 

as mandated by section 1899B of the Act. 

In the FY 2015 IPPS/LTCH PPS final rule 

(79 FR 50443 through 50445) we discussed 

burden estimates that were inclusive of the 

12 previously finalized measures we are 

retaining in this proposed rule. We 

previously estimated the total cost for all 12 

quality measures to be $17,410 per LTCH 

annually, or $7,695,423 for all LTCHs 

annually (79 FR 50443 through 50445); or 

$2,992,384 for all quality measures reported 

via the CDC’s NHSN; and $4,703,039 for all 

quality measures reported to CMS using the 

LTCH CARE Data Set version 2.0. For a list 

of the 12 previously finalized measures 

included in the above burden estimate, we 

refer readers to the FY 2015 IPPS/LTCH PPS 

final rule. 

The burden calculation discussed in the 

FY 2015 IPPS/LTCH PPS final rule (79 FR 

50443 through 50445) accounts for any 

burden associated with newly proposed 

measures in this FY 2016 IPPS/LTCH PPS 

proposed rule. The measure Percent of 

Residents or Patients with Pressure Ulcers 

That Are New or Worsened (Short Stay) 

(NQF #0678) is currently being reported by 

LTCHs using version 2.01 of the LTCH CARE 

Data Set, which has burden approval under 

OMB control number 0938–1163. The burden 

associated with the proposed application of 

the measure Percent of Residents 

Experiencing One or More Falls with Major 

Injury (Long Stay) (NQF #0674) is discussed 

at length in the FY 2015 IPPS/LTCH PPS 

final rule, and is included in the above total 

annual burden figures in that rule, as well as 

listed above. 

The measure All-Cause Unplanned 

Readmission Measure for 30 Days PostDischarge from LTCHs (NQF #2512) is 

calculated based on CMS FFS claims data, 

and therefore does not have any associated 

data reporting burden for LTCH providers. 

The new quality measure we are proposing 

to include in the LTCH QRP, Cross-Setting 

Functional Status Process Measure: Percent 

of Patients or Residents with an Admission 

and Discharge Functional Assessment and a 

Care Plan that Addresses Function, is not 

specifically discussed in the FY 2015 IPPS/ 

LTCH PPS final rule. However, the data 

elements used to report this quality measure 

to CMS are included in that discussion and 

burden estimate in that final rule, because we 

are proposing to use a subset of the same data 

elements that are used to report the 

previously finalized measure Percent of 

Long-Term Care Hospital Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That Addresses 

Function, which is included in that burden 

estimate. Therefore, the proposed addition of 

this quality measure to the LTCH QRP does 

not increase burden on LTCHs. 

Currently, LTCHs use two separate data 

collection mechanisms to report quality data 

to CMS: The CDC’s NHSN, which is used to 

report all Healthcare Associated Infection 

(HAI) and vaccination data (used to calculate 

CAUTI, CLABSI, MRSA, CDI, VAE, and 

healthcare personnel Influenza vaccination 

measures); and the Quality Improvement and 

Evaluation System Assessment Submission 

and Processing (QIES–ASAP) system, which 

is used by LTCHs to report quality data via 

the LTCH CARE Data Set. 

The data collection burden associated with 

the reporting of the quality measures (HAI 

and vaccination) reported via the CDC’s 

NHSN is discussed in the FY 2015 IPPS/

LTCH PPS final rule (79 FR 50443 through 

50445). However, we note that these 

measures are stewarded by the CDC, and the 

reporting burden is approved under OMB 

control number 0920–0666. 

The remaining quality measures are 

reported to CMS by LTCHs using the LTCH 

CARE Data Set (LCDS). Currently, LTCHs are 

using version 2.01 of the LCDS (approved 

under OMB control number 0938–1163) 

which includes data elements related to two 

quality measures: Percent of Patients or 

Residents with Pressure Ulcers that are new 

or Worsened (NQF #0678), and Percent of 

Residents or Patients Who Were Assessed 

and Appropriately Given the Seasonal 

Influenza Vaccine (NQF #0680). 

We have developed a subsequent iteration 

of the LCDS (version 3.0), which will also 

include data elements for the three quality 

measures we previously finalized in the FY 

2015 IPPS/LTCH PPS final rule: Application 

of Percent of Residents Experiencing One or 

More Falls with Major Injury (Long Stay) 

(NQF #0674); Percent of Long-Term Care 

Hospital Patients with an Admission and 

Discharge Functional Assessment and a Care 

Plan That Addresses Function (NQF #2631— 

under NQF review); and Functional Status 

Outcome Measure: Change in Mobility 

Among Long-Term Care Hospital Patients 

Requiring Ventilator Support (NQF #2632— 

under NQF review). We refer readers to 

section X.B.9. of the preamble of this 

proposed rule for a discussion of the 

additional data elements in Version 3.0 of the 

LCDS. 

Version 3.0 of the LTCH CARE Data Set 

will also be used to report the newly 

proposed measure Cross-Setting Functional 

Status Process Measure: Percent of Patients 

or Residents with an Admission and 

Discharge Functional Assessment and a Care 

Plan that Addresses Function. However, the 

data items that will inform this measure are 

a subset of the data elements currently used 

to report the LTCH-specific measure, Percent 

of Long-Term Care Hospital Patients with an 

Admission and Discharge Functional 

Assessment and a Care Plan That Addresses 

Function (NQF #2631—under review by 

NQF). Therefore this proposed measure 

would not add any data collection burden 

beyond that discussed in the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 50443 through 

50445), in which NQF #2631 was finalized. 

LTCH burden related to the submission of 

version 3.0 of the LCDS, has been previously 

discussed in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50443 through 50445), and 

is included in the total annual burden noted 

in that rule, which is $17,410 per LTCH 

annually, or $7,695,423 for all LTCHs 

annually. We believe that this estimate 

remains unchanged as a result of the LTCH 

QRP proposals in this proposed rule. 

N. Effects of Proposed Requirements 

Regarding Electronic Health Record (EHR) 

Meaningful Use Program 

In section VIII.D. of the preamble of this 

proposed rule, we discuss proposed 

requirements for the EHR Incentive Program. 

We are proposing CQM reporting 

requirements, including reporting periods 

and submission periods, as well as CQMs 

required and information about CQM 

specifications’ updates, for the Medicare EHR 

Incentive Program for eligible hospitals and 

CAHs for 2016. We note that these proposals 

would only apply for eligible hospitals and 

CAHs submitting CQMs electronically in CY 

2016. Because these proposals for data 

collection would align with the reporting 

requirements in place for the Hospital IQR 

Program and eligible hospitals and CAHs still 

have the option to submit their clinical 

quality measures via attestation for the 

Medicare EHR Incentive Program, we do not 

believe these proposals would have a 

significant impact. 

II. Alternatives Considered 

This proposed rule contains a range of 

proposed policies. It also provides 

descriptions of the statutory provisions that 

are addressed, identifies the proposed 

policies, and presents rationales for our 

decisions and, where relevant, alternatives 

that were considered. 

III. Overall Conclusion 

1. Acute Care Hospitals 

Table I of section I.G. of this Appendix 

demonstrates the estimated distributional 

impact of the IPPS budget neutrality 

requirements for the proposed MS–DRG and 

wage index changes, and for the wage index 

reclassifications under the MGCRB. Table I 

also shows an overall increase of 0.3 percent 

in operating payments. As discussed in 

section I.G. of this Appendix, we estimate 

that proposed operating payments will 

increase by approximately $278 million in 

FY 2016 relative to FY 2015. However, when 

we account for the impact of the changes in 

Medicare DSH payments and the impact of 

the new additional payments based on 

uncompensated care in accordance with 

section 3133 of the Affordable Care Act, 

based on estimates provided by the CMS 


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Office of the Actuary, consistent with our 

policy discussed in section IV.D. of the 

preamble of this proposed rule, we estimate 

that operating payments will decrease by 

approximately $11 million relative to FY 

2015. We currently estimate that the changes 

in new technology add-on payments for FY 

2016 will decrease spending by 

approximately $31 million due to the 

expiration of three new technology add-on 

payments. This estimate, combined with our 

estimated decrease in FY 2016 operating 

payment of $11 million, result in an 

estimated decrease of approximately $42 

million for FY 2016. We estimate that 

hospitals will experience a 2.0 percent 

increase in capital payments per case, as 

shown in Table III of section I.I. of this 

Appendix. We project that there will be a 

$163 million increase in capital payments in 

FY 2016 compared to FY 2015. The proposed 

cumulative operating and capital payments 

would result in a net increase of 

approximately $121 million to IPPS 

providers. The discussions presented in the 

previous pages, in combination with the rest 

of this proposed rule, constitute a regulatory 

impact analysis. 

2. LTCHs 

Overall, LTCHs are projected to experience 

a decrease in estimated payments per 

discharge in FY 2016. In the impact analysis, 

we are using the proposed rates, factors, and 

policies presented in this proposed rule, 

including proposed updated wage index 

values and relative weights, and the best 

available claims and CCR data to estimate the 

change in payments under the LTCH PPS for 

FY 2016. Accordingly, based on the best 

available data for the 418 LTCHs in our 

database, we estimate that FY 2016 LTCH 

PPS payments will decrease approximately 

$251 million relative to FY 2015 as a result 

of the proposed payment rates and factors 

presented in this proposed rule. 

IV. Accounting Statements and Tables 

A. Acute Care Hospitals 

As required by OMB Circular A–4 

(available at http://www.whitehouse.gov/

omb/circulars/a004/a-4.pdf), in Table V 

below, we have prepared an accounting 

statement showing the classification of the 

expenditures associated with the provisions 

of this proposed rule as they relate to acute 

care hospitals. This table provides our best 

estimate of the change in Medicare payments 

to providers as a result of the proposed 

changes to the IPPS presented in this 

proposed rule. All expenditures are classified 

as transfers to Medicare providers. 

The costs to the Federal Government 

associated with the policies in this proposed 

rule are estimated at $143 million. 

TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF PROPOSED ESTIMATED EXPENDITURES UNDER THE IPPS FROM

FY 2015 TO FY 2016 

Category Transfers 

Annualized Monetized Transfers .............................................................. $143 million. 

From Whom to Whom .............................................................................. Federal Government to IPPS Medicare Providers. 

B. LTCHs 

As discussed in section I.J. of this 

Appendix, the impact analysis of the 

payment rates and factors presented in this 

proposed rule under the LTCH PPS, is 

projected to result in a decrease in estimated 

aggregate LTCH PPS payments in FY 2016 

relative to FY 2015 of approximately ¥$251 

million based on the data for 418 LTCHs in 

our database that are subject to payment 

under the LTCH PPS. Therefore, as required 

by OMB Circular A–4 (available at http://

www.whitehouse.gov/omb/circulars/a004/a4.pdf), in Table VI below, we have prepared 

an accounting statement showing the 

classification of the expenditures associated 

with the provisions of this proposed rule as 

they relate to the changes to the LTCH PPS. 

Table VI provides our best estimate of the 

estimated increase in Medicare payments 

under the LTCH PPS as a result of the 

proposed payment rates and factors and other 

provisions presented in this proposed rule 

based on the data for the 418 LTCHs in our 

database. All expenditures are classified as 

transfers to Medicare providers (that is, 

LTCHs). 

The savings to the Federal Government 

associated with the proposed policies for 

LTCHs in this proposed rule are estimated at 

$251 million. 

TABLE VI—ACCOUNTING STATEMENT: CLASSIFICATION OF PROPOSED ESTIMATED EXPENDITURES FROM THE FY 2015 

LTCH PPS TO THE FY 2016 LTCH PPS 

Category Transfers 

Annualized Monetized Transfers .............................................................. ¥$251 million. 

From Whom to Whom .............................................................................. Federal Government to LTCH Medicare Providers. 

V. Regulatory Flexibility Act (RFA) Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small entities. 

For purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and small government 

jurisdictions. We estimate that most hospitals 

and most other providers and suppliers are 

small entities as that term is used in the RFA. 

The great majority of hospitals and most 

other health care providers and suppliers are 

small entities, either by being nonprofit 

organizations or by meeting the SBA 

definition of a small business (having 

revenues of less than $7.5 million to $38.5 

million in any 1 year). (For details on the 

latest standards for health care providers, we 

refer readers to page 36 of the Table of Small 

Business Size Standards for NAIC 622 found 

on the SBA Web site at: http://www.sba.gov/ 

sites/default/files/files/Size_Standards_

Table.pdf.) 

For purposes of the RFA, all hospitals and 

other providers and suppliers are considered 

to be small entities. Individuals and States 

are not included in the definition of a small 

entity. We believe that the provisions of this 

proposed rule relating to acute care hospitals 

would have a significant impact on small 

entities as explained in this Appendix. 

Because we lack data on individual hospital 

receipts, we cannot determine the number of 

small proprietary LTCHs. Therefore, we are 

assuming that all LTCHs are considered 

small entities for the purpose of the analysis 

in section I.J. of this Appendix. MACs are not 

considered to be small entities. Because we 

acknowledge that many of the affected 

entities are small entities, the analysis 

discussed throughout the preamble of this 

proposed rule constitutes our regulatory 

flexibility analysis. In this proposed rule, we 

are soliciting public comments on our 

estimates and analysis of the impact of our 

proposals on those small entities. Any public 

comments that we receive and our responses 

will be presented in the final rule. 

VI. Impact on Small Rural Hospitals 

Section 1102(b) of the Social Security Act 

requires us to prepare a regulatory impact 

analysis for any proposed or final rule that 

may have a significant impact on the 

operations of a substantial number of small 

rural hospitals. This analysis must conform 

to the provisions of section 603 of the RFA. 

With the exception of hospitals located in 

certain New England counties, for purposes 

of section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is 

located outside of an urban area and has 

fewer than 100 beds. Section 601(g) of the 

Social Security Amendments of 1983 (Pub. L. 


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98–21) designated hospitals in certain New 

England counties as belonging to the adjacent 

urban area. Thus, for purposes of the IPPS 

and the LTCH PPS, we continue to classify 

these hospitals as urban hospitals. (We refer 

readers to Table I in section I.G. of this 

Appendix for the quantitative effects of the 

proposed policy changes under the IPPS for 

operating costs.) 

VII. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4) also 

requires that agencies assess anticipated costs 

and benefits before issuing any rule whose 

mandates require spending in any 1 year of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2015, that threshold 

level is approximately $144 million. This 

proposed rule will not mandate any 

requirements for State, local, or tribal 

governments, nor will it affect private sector 

costs. 

VIII. Executive Order 12866 

In accordance with the provisions of 

Executive Order 12866, the Executive Office 

of Management and Budget reviewed this 

proposed rule. 

Appendix B: Recommendation of 

Update Factors for Operating Cost 

Rates of Payment for Inpatient Hospital 

Services 

I. Background 

Section 1886(e)(4)(A) of the Act requires 

that the Secretary, taking into consideration 

the recommendations of MedPAC, 

recommend update factors for inpatient 

hospital services for each fiscal year that take 

into account the amounts necessary for the 

efficient and effective delivery of medically 

appropriate and necessary care of high 

quality. Under section 1886(e)(5) of the Act, 

we are required to publish update factors 

recommended by the Secretary in the 

proposed and final IPPS rules, respectively. 

Accordingly, this Appendix provides the 

recommendations for the update factors for 

the IPPS national standardized amount, the 

Puerto Rico-specific standardized amount, 

the hospital-specific rate for SCHs, and the 

rate-of-increase limits for certain hospitals 

excluded from the IPPS, as well as LTCHs. 

In prior years, we have made a 

recommendation in the IPPS proposed rule 

and final rule for the update factors for the 

payment rates for IRFs and IPFs. However, 

for FY 2016, we plan to include the 

Secretary’s recommendation for the update 

factors for IRFs and IPFs in separate Federal 

Register documents at the time that we 

announce the annual updates for IRFs and 

IPFs. We also discuss our response to 

MedPAC’s recommended update factors for 

inpatient hospital services. 

II. Inpatient Hospital Update for FY 2016 

A. Proposed FY 2016 Inpatient Hospital 

Update 

As discussed in section IV.B of the 

preamble to this proposed rule, consistent 

with section 1886(b)(3)(B) of the Act, as 

amended by sections 3401(a) and 10319(a) of 

the Affordable Care Act, we are setting the 

applicable percentage increase by applying 

the following adjustments in the following 

sequence. Specifically, the applicable 

percentage increase under the IPPS is equal 

to the rate-of-increase in the hospital market 

basket for IPPS hospitals in all areas, subject 

to a reduction of one-quarter of the 

applicable percentage increase (prior to the 

application of other statutory adjustments; 

also referred to as the market basket update 

or rate-of-increase (with no adjustments)) for 

hospitals that fail to submit quality 

information under rules established by the 

Secretary in accordance with section 

1886(b)(3)(B)(viii) of the Act and a 662⁄3

percent reduction to three-fourths of the 

applicable percentage increase (prior to the 

application of other statutory adjustments; 

also referred to as the market basket update 

or rate-of-increase (with no adjustments)) for 

hospitals not considered to be meaningful 

electronic health record (EHR) users in 

accordance with section 1886(b)(3)(B)(ix) of 

the Act, and then subject to an adjustment 

based on changes in economy-wide 

productivity (the multifactor productivity 

(MFP) adjustment), and an additional 

reduction of 0.2 percentage point as required 

by section 1886(b)(3)(B)(xii) of the Act. 

Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of 

the Act, as added by section 3401(a) of the 

Affordable Care Act, state that application of 

the MFP adjustment and the additional FY 

2016 adjustment of 0.2 percentage point may 

result in the applicable percentage increase 

being less than zero. 

Based on the most recent data available for 

this FY 2016 IPPS/LTCH PPS proposed rule, 

in accordance with section 1886(b)(3)(B) of 

the Act, we are proposing to base the 

proposed FY 2016 market basket update used 

to determine the applicable percentage 

increase for the IPPS on the IHS Global 

Insight, Inc. (IGI’s) first quarter 2015 forecast 

of the FY 2010-based IPPS market basket 

rate-of-increase with historical data through 

fourth quarter 2014, which is estimated to be 

2.7 percent. In accordance with section 

1886(b)(3)(B) of the Act, as amended by 

section 3401(a) of the Affordable Care Act, in 

section IV.A.1. of the preamble of this FY 

2016 IPPS/LTCH PPS proposed rule, we are 

proposing an MFP adjustment of 0.6 percent 

for FY 2016. Therefore, based on IGI’s first 

quarter 2015 forecast of the FY 2010-based 

IPPS market basket, depending on whether a 

hospital submits quality data under the rules 

established in accordance with section 

1886(b)(3)(B)(viii) of the Act (hereafter 

referred to as a hospital that submits quality 

data) and is a meaningful EHR user under 

section 1886(b)(3)(B)(ix) of the Act (hereafter 

referred to as a hospital that is a meaningful 

EHR user), there are four possible applicable 

percentage increases that can be applied to 

the standardized amount. Below we provide 

a table summarizing the four proposed 

applicable percentage increases. 

FY 2016 

Hospital 

submitted 

quality data 

and is a 

meaningful 

EHR user 

Hospital 

submitted 

quality data 

and is NOT a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is a 

meaningful 

EHR user 

Hospital did 

NOT submit 

quality data 

and is NOT a 

meaningful 

EHR user 

Proposed Market Basket Rate-of-Increase ..................................................... 2.7 2.7 2.7 2.7 

Proposed Adjustment for Failure to Submit Quality Data under Section 

1886(b)(3)(B)(viii) of the Act ........................................................................ 0.0 0.0 ¥0.675 ¥0.675 

Proposed Adjustment for Failure to be a Meaningful EHR User under Section 1886(b)(3)(B)(ix) of the Act ................................................................... 0.0 ¥1.35 0.0 ¥1.35 

Proposed MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act .......... ¥0.6 ¥0.6 ¥0.6 ¥0.6 

Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the Act ................... ¥0.2 ¥0.2 ¥0.2 ¥0.2 

Proposed Applicable Percentage Increase Applied to Standardized Amount 1.9 0.55 1.225 ¥0.125 

B. Proposed Update for SCHs for FY 2016 

Section 1886(b)(3)(B)(iv) of the Act 

provides that the FY 2016 applicable 

percentage increase in the hospital-specific 

rate for SCHs equals the applicable 

percentage increase set forth in section 

1886(b)(3)(B)(i) of the Act (that is, the same 

update factor as for all other hospitals subject 

to the IPPS). We note that the MDH program 

expired for discharges beginning on April 1, 

2015 under current law. 

As mentioned above, the update to the 

hospital specific rate for SCHs is subject to 

section 1886(b)(3)(B)(i) of the Act, as 

amended by sections 3401(a) and 10319(a) of 

the Affordable Care Act. Accordingly, 

depending on whether a hospital submits 

quality data and is a meaningful EHR user, 

we are proposing the same four possible 

applicable percentage increases in the table 

above to the hospital-specific rate applicable 

to SCHs. 


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C. Proposed FY 2016 Puerto Rico Hospital 

Update 

Section 401(c) of Public Laws 108–173 

amended section 1886(d)(9)(C)(i) of the Act 

and states that, for discharges occurring in a 

fiscal year (beginning with FY 2004), the 

Secretary shall compute an average 

standardized amount for hospitals located in 

any area of Puerto Rico that is equal to the 

average standardized amount computed 

under subclause (I) for FY 2003 for hospitals 

in a large urban area (or, beginning with FY 

2005, for all hospitals in the previous fiscal 

year) increased by the applicable percentage 

increase under subsection (b)(3)(B) for the 

fiscal year involved. Therefore, the update to 

the Puerto Rico-specific operating 

standardized amount is subject to the 

applicable percentage increase set forth in 

section 1886(b)(3)(B)(i) of the Act as 

amended by sections 3401(a) and 10319(a) of 

the Affordable Care Act (that is, the same 

update factor as for all other hospitals subject 

to the IPPS). Accordingly, we are proposing 

an applicable percentage increase to the 

Puerto Rico-specific standardized amount of 

1.9 percent. 

D. Proposed Update for Hospitals Excluded 

From the IPPS 

Section 1886(b)(3)(B)(ii) of the Act is used 

for purposes of determining the percentage 

increase in the rate-of-increase limits for 

children’s hospitals, cancer hospitals, and 

hospitals located outside the 50 States, the 

District of Columbia, and Puerto Rico (that is, 

short-term acute care hospitals located in the 

U.S. Virgin Islands, Guam, the Northern 

Mariana Islands, and American Samoa). 

Section 1886(b)(3)(B)(ii) of the Act sets the 

percentage increase in the rate-of-increase 

limits equal to the market basket percentage 

increase. In accordance with § 403.752(a) of 

the regulations, RNHCIs are paid under the 

provisions of § 413.40, which also use section 

1886(b)(3)(B)(ii) of the Act to update the 

percentage increase in the rate-of-increase 

limits. 

Currently, children’s hospitals, PPSexcluded cancer hospitals, RNHCIs, and 

short-term acute care hospitals located in the 

U.S. Virgin Islands, Guam, the Northern 

Mariana Islands, and American Samoa are 

among the remaining types of hospitals still 

paid under the reasonable cost methodology, 

subject to the rate-of-increase limits. As we 

finalized in the FY 2015 IPPS/LTCH PPS 

final rule (79 FR 50156 through 50157), the 

FY 2016 rate-of-increase percentage to be 

applied to the target amount for children’s 

hospitals, PPS-excluded cancer hospitals, 

RNHCIs, and short-term acute care hospitals 

located in the U.S. Virgin Islands, Guam, the 

Northern Mariana Islands, and American 

Samoa would be the percentage increase in 

the IPPS operating market basket. For this 

proposed rule, the current estimate of the FY 

2016 IPPS operating market basket 

percentage increase is 2.7 percent. 

E. Proposed Update for LTCHs for FY 2016 

Section 123 of Public Laws 106–113, as 

amended by section 307(b) of Public Laws 

106–554 (and codified at section 1886(m)(1) 

of the Act), provides the statutory authority 

for updating payment rates under the LTCH 

PPS. Under section 1886(m)(6)(A) of the Act 

as added by section 1206(a) of Public Laws 

113–67, beginning in cost reporting periods 

starting on or after October 1, 2015, all LTCH 

discharges are paid according to the site 

neutral payment rate unless certain criteria 

are met. For LTCH cases that meet the criteria 

for exclusion, the site neutral payment rate 

does not apply and payment will be made 

without regard to the provisions of section 

1886(m)(6) of the Act. For cases that meet the 

criteria for exclusion from the site neutral 

payment rate, payment will continue to be 

based on the LTCH PPS standard Federal 

payment rate as determined in § 412.523. 

(For additional details on the change to 

LTCH PPS payments under section 

1886(m)(6)(A) of the Act, specifically the 

establishment of the site neutral payment 

rate, we refer readers to section VII.B.3. of the 

preamble of this proposed rule.) 

As discussed in section V.A. of the 

Addendum to this proposed rule, we are 

proposing to establish an update to the LTCH 

PPS standard Federal rate for FY 2016 based 

on the full LTCH PPS market basket increase 

estimate (for this proposed rule, estimated to 

be 2.7 percent), subject to an adjustment 

based on changes in economy-wide 

productivity and an additional reduction 

required by sections 1886(m)(3)(A)(ii) and 

(m)(4)(E) of the Act. In accordance with the 

LTCHQRP under section 1886(m)(5) of the 

Act, we are proposing to reduce the annual 

update to the LTCH PPS standard Federal 

rate by 2.0 percentage points for failure of a 

LTCH to submit the required quality data. 

The MFP adjustment described under section 

1886(b)(3)(B)(xi)(ii) of the Act is currently 

estimated to be 0.6 percent for FY 2016. In 

addition, section 1886(m)(3)(A)(ii) of the Act 

requires that any annual update for FY 2016 

be reduced by the ‘‘other adjustment’’ at 

section 1886(m)(4)(E) of the Act, which is 0.2 

percentage point. Therefore, based on IGI’s 

first quarter 2015 forecast of the FY 2016 

LTCH PPS market basket increase, we are 

proposing to establish an annual update to 

the LTCH PPS standard Federal rate of 1.9 

percent (that is, the current FY 2016 estimate 

of the market basket rate-of-increase of 2.7 

percent less a proposed adjustment of 0.6 

percentage point for MFP and less 0.2 

percentage point). Accordingly, we are 

proposing to apply an update factor of 1.9 

percent in determining the LTCH PPS 

standard Federal rate for FY 2016. For LTCHs 

that fail to submit quality data for FY 2016, 

we are proposing to apply an annual update 

to the LTCH PPS standard Federal rate of -0.1 

percent (that is, the proposed annual update 

for FY 2016 of 1.9 percent less 2.0 percentage 

points for failure to submit the required 

quality data in accordance with section 

1886(m)(5)(C) of the Act and our rules) by 

applying a proposed update factor of ¥0.1 

percent in determining the LTCH PPS 

standard Federal rate for FY 2016. 

III. Secretary’s Recommendations 

MedPAC is recommending an inpatient 

hospital update equal to 3.25 percent for FY 

2016. MedPAC’s rationale for this update 

recommendation is described in more detail 

below. As mentioned above, section 

1886(e)(4)(A) of the Act requires that the 

Secretary, taking into consideration the 

recommendations of MedPAC, recommend 

update factors for inpatient hospital services 

for each fiscal year that take into account the 

amounts necessary for the efficient and 

effective delivery of medically appropriate 

and necessary care of high quality. Consistent 

with current law, depending on whether a 

hospital submits quality data and is a 

meaningful EHR user, we are recommending 

the four possible applicable percentage 

increases to the standardized amount listed 

in the table under section II. of this Appendix 

B. We are recommending that the same 

applicable percentage increases apply to 

SCHs. For the Puerto Rico-specific 

standardized amount, we are recommending 

an update of 1.9 percent. 

In addition to making a recommendation 

for IPPS hospitals, in accordance with 

section 1886(e)(4)(A) of the Act, we are 

recommending update factors for certain 

other types of hospitals excluded from the 

IPPS. Consistent with our policies for these 

facilities, we are recommending an update to 

the target amounts for children’s hospitals, 

cancer hospitals, RNHCIs, and short-term 

acute care hospitals located in the U.S. Virgin 

Islands, Guam, the Northern Mariana Islands, 

and American Samoa of 2.7 percent. 

For FY 2016, consistent with policy set 

forth in section VII. of the preamble of this 

proposed rule, for LTCHs that submit quality 

data, we are recommending an update of 1.9 

percent to the LTCH PPS standard Federal 

rate. For LTCHs that fail to submit quality 

data for FY 2016, we are proposing to apply 

an annual update to the LTCH PPS standard 

Federal rate of ¥0.1 percent. 

IV. MedPAC Recommendation for Assessing 

Payment Adequacy and Updating Payments 

in Traditional Medicare 

In its March 2015 Report to Congress, 

MedPAC assessed the adequacy of current 

payments and costs and the relationship 

between payments and an appropriate cost 

base. MedPAC recommended an update to 

the hospital inpatient rates equal to 3.25 

percent concurrent with changes to the 

outpatient prospective payment system and 

with initiating change to the LTCH PPS. We 

refer the reader to the March 2015 MedPAC 

report, which is available on the Web site at 

http://www.medpac.gov for a complete 

discussion on this recommendation. 

MedPAC expects Medicare margins to remain 

low in 2015. At the same time, MedPAC’s 

analysis finds that efficient hospitals have 

been able to maintain positive Medicare 

margins while maintaining a relatively high 

quality of care. However, under current law, 

payment margins are projected to decline 

which could result in negative Medicare 

margins industry wide. Specifically, 

MedPAC noted several current law policy 

changes are scheduled to reduce payments in 

FY 2015 and FY 2016. Because of these 

changes and reduced payments, MedPAC 

asserted that an update of 3.25 percent in the 

base payment is warranted. MedPAC 

maintains that Medicare payment rates 

should be determined by analysis of payment 

adequacy rather than an across-the-board 

sequester reduction. Therefore, MedPAC 

recommended that hospitals receive base 


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Federal Register / Vol. 80, No. 83 / Thursday, April 30, 2015 / Proposed Rules 24689 

payment rates that are 3.25 percent higher 

than the FY 2015 base payment rates, and 

there should be no sequester adjustment. 

However, MedPAC concluded that if the 

Congress increases hospital payments by 

reinstating expiring special payments, the 

full 3.25 percent update would not be 

warranted. 

Response: With regard to MedPAC’s 

recommendation of an update to the hospital 

inpatient rates equal to 3.25 percent, for FY 

2016, as discussed above, section 

1886(b)(3)(B) of the Act, as amended by 

sections 3401(a) and 10319(a) of the 

Affordable Care Act, sets the requirements for 

the FY 2016 applicable percentage increase. 

Therefore, we are proposing an applicable 

percentage increase for FY 2016 of 1.9 

percent, provided the hospital submits 

quality data and is a meaningful EHR user, 

consistent with these statutory requirements. 

We note that, because the operating and 

capital prospective payment systems remain 

separate, we are continuing to use separate 

updates for operating and capital payments. 

The update to the capital rate is discussed in 

section III. of the Addendum to this proposed 

rule. 

[FR Doc. 2015–09245 Filed 4–17–15; 4:15 pm] 

BILLING CODE 4120–1–P 


tkelley on DSK3SPTVN1PROD with PROPOSALS2